Switzerland outpaced by other European countries

Twenty years ago Switzerland was one of the most sought after places for multinationals looking for a European head office.

With changing times, however, the country is losing its attractiveness. Companies are looking at other locations such as Ireland, Luxembourg, the UK, and the Netherlands. Even Swiss multinationals are moving selected subsidiaries to other countries.

Switzerland still has a strong repute and undeniable strengths, including the ease of doing business and quality of life. This is reflected in a report by McKinsey in which they interviewed over 100 corporate executives. Yet the report, entitled Switzerland Wake Up - Reinforcing Switzerland's Attractiveness to Multinationals, is a clarion call for the country to stem the tide of multinationals leaving the country or choosing other places to set up their new European home.

Scenic mountain ranges and punctual train connections are here to stay but do not directly attract companies.

Multinational contribution in Switzerland

Swiss and foreign multinationals – which make up just 4 percent of all companies in Switzerland - produces 36 percent of Swiss GDP (CHF 669 billion in 2017), creating more than 1.3 million jobs (26 percent of all jobs in Switzerland), and generates nearly 50 percent of the country’s federal corporate tax revenues.

Furthermore, multinationals tend to create high-productivity jobs, especially in the pharma/healthcare sector, thus making an essential contribution to Switzerland’s productivity.

Investor concerns

Switzerland is facing business and policy challenges that threaten its attractiveness. These include a proposed Swiss tax reform, transatlantic free-trade agreements (US–EU and US–CH), the reform of the Swiss Code of Obligations bilateral agreements with the European Union and more generally Switzerland’s relationship with the EU, and a potential Federal vote on a Responsible Business Initiative. The latter, though still under consideration, may mean that companies based in here will be liable for the transgressions of their subsidiaries worldwide.

Less tech invasions

The report highlights the fact that the country seems to be lagging in attracting technology firms. Only 3 percent of tech companies have chosen Switzerland in the last five years compared to 18 percent for the UK and 11 percent for the Netherlands. Switzerland also lost out in the race to attract Chinese companies such as Alibaba, attracting only 5 percent of Chinese companies whereas the UK captured 24 percent of the pie.

Against the trend

Google has called Zurich its second home for a decade and with an existing employee force of around 2,000 local employees, making it the second-largest Google location outside Silicon Valley.

Other organizations like Alcon, the Novartis eye care spin-off, is planning to move its base from Texas to Geneva, and plans to recruit 700 people in Switzerland. Adidas is building new operations in Lucerne.

The cluster of pharmaceutical, R&D, life sciences and healthcare companies, especially in Basel, remains an attractive feature of the country. The Basel region ranks first globally when it comes to R&D expenditures in terms of regional GDP and has the highest number of pharmaceutical patents per million inhabitants.

Sources:

Links:

A talent bottleneck, Swissinfo

Geneva Struggles to attract new US companies, Swissinfo

Switzerland Wake Up - Reinforcing Switzerland's Attractiveness to Multinationals, McKinsey

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