The Alpine nation’s impressive growth shows no signs of slowing down Jurgen Borgt, Managing Director, and Emma Holthuizen, Business Development Manager, Intertrust Switzerland, look at what the rest of 2022 has in store, from tax cuts and “Swexit” to the Swiss real estate market and Swiss crypto market.
Switzerland enjoyed a strong year in 2021, with a boom in the number of companies registering along with record exports and solid economic growth.
Despite – or thanks to – the global pandemic, this is a European country that continues to be an attractive place to live and work.
The country’s State Secretariat for Economic Affairs is forecasting a 3% increase in gross domestic product (GDP) this year, with sectors such as Swiss watchmaking, Swiss pharma and Swiss crypto expected to shine.
Last year, exports hit a record CHF259.5 billion, marking an annual increase of 15.2%. There has also been a surge in the number of companies registering in Switzerland: around 50,900 new companies joined the commercial register last year, a rise of 8.6% compared to 2019.
At Intertrust Group, Swiss deals activity is the highest we have seen and shows no sign of abating in 2022. This is despite uncertainty over the ongoing pandemic and choppy stock markets.
The Swiss pharma industry has been responsible for more than a third of GDP growth since 2010 and continues to thrive. There are headwinds, however, such as the increase in competition posed to Swiss pharma giants Roche and Novartis by BioNTech and Moderna, the companies behind two Covid-19 vaccines.
Demand for luxury watches has bounced back following a difficult year in 2020.
Business is brisk in the town of Zug, also known as Crypto Valley. According to reports, there are now 960 crypto start-ups in Switzerland, with nearly half of them based in Zug.
The Swiss authorities have been proactive in trying to make sense of the digital world: a “blockchain law” was introduced last year, a digital stock exchange called SIX Digital Exchange has launched, and the market regulator, Finma, has licensed two crypto banks. Meanwhile the art market, thanks to non-fungible tokens, is booming.
We continue to see multinationals choosing Switzerland as their European headquarters. This includes American firms that want a European hub to handle their day-to-day operations as well as companies that incorporate local subsidiaries.
It could be argued that Covid has actually prompted businesses to set up here as part of a larger trend of people moving for a better quality of life.
As well as its natural beauty, the Alpine republic is regarded as safe, clean, and politically and fiscally stable. Residents enjoy low taxes, high salaries and first-class infrastructure.
Swiss cities such as Zug consistently rank among the best places to live in the world. Last month it won “best micro city” in fDi Intelligence’s European Cities and Regions of the Future 2022/23 report.
Zürich, Switzerland’s largest city, was placed first in the mid-sized city category, thanks in part to its well-developed innovation eco-system. And Basel, home to the headquarters of several pharma giants, won best small city.
Geographically, Switzerland is ideally located in the centre of Europe, making it easy for executives to travel to neighbouring countries and beyond.
Naturally, the uncertainty over new Covid variants is a risk. Switzerland has a fairly low vaccine rate – 68% of the population is fully vaccinated, compared to 77% in France and 78% in Italy, according to Our World In Data. While the nation returned to “normal” in February, with an end to quarantines and mandatory working from home.
Hiring employees can be difficult. Switzerland has a highly educated but small population and there is a reliance on workers from neighbouring France, Germany and Italy.
Politically, there is the issue of “Swexit”. Since Bern walked away from trade negotiations with the European Union last year, there are doubts over whether talks can be restarted. The EU is threatening to treat Switzerland as a third country, which could have a big impact on how its people travel and businesses trade with each other. Economic ties with the EU bloc would loosen and certain benefits eroded. Whether or not this is all “much ado about nothing” remains to be seen.
When it comes to matters like tax, Switzerland’s fate is often in the hands of its electorate, with referendums called on all manner of issues. In February 2022, almost two-thirds of voters threw out a plan to abolish stamp duty on equity capital for Swiss companies, which would have made the country a more attractive business location.
In 2021, voters rejected a proposal to introduce a wealth tax.
Meanwhile, the real estate market is buoyant. The investment property prices index rose by 5.85% in 2021, while the residential property vacancy rate fell. The iconic 126 metre-high Prime Tower in Zurich has had no trouble filling its office space when tenants move out: it is fully let and has even recently been able to raise its prices.
Bringing all these elements together, there is little doubt that Switzerland is an attractive place to live, do business and invest. The outlook is bright.