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03 February 2015

Small firms mourn Swiss peg 

Small and medium-sized companies in Switzerland are struggling with the end of their currency’s three-year peg against the euro, which provided firms doing business abroad with some certainty in their financial planning.

For exporters in particular, the outlook is rough. While multinationals can hedge the risks of a rising currency, for instance through cheaper inputs and if necessary by carrying out functions abroad, most smaller companies lack those options. Many firms, such as specialist watch manufacturers, are already suffering slowing sales and cancelled orders.

For example, nearly two-thirds of all members of Swissmem, which represents companies in the machine building, electrical engineering and metal sectors, export products to the eurozone. More than 99% of all Swiss firms employ fewer than 250 staff, and three-quarters of Swissmem’s have fewer than 10.

Manufacturers surveyed last year by the KOF Swiss Economic Institute expected sales to fall 3.4% within six months of the central bank removing the currency ceiling, and by 4.2% after 18 months.

However, the Swiss SME Association says the policy change should not have been a great surprise since the Swiss National Bank had consistently said the peg was only a temporary measure.

The association says companies should have used the breathing space offered by the peg to reduce costs, improve processes, invest in new technology and discover new export markets outside the eurozone.

But the government could also do its part by cutting unnecessary regulation and aligning its import and export rules with those of the EU, saving small businesses as much as 10 billion Swiss francs in administrative costs. Its wish list, once "nice to have," has now become "must have."