Cautious optimism among Swiss CFOs

According to the latest quarterly Deloitte CFO Survey, Swiss CFOs are once again somewhat more optimistic than they were three months ago. The overall state of the economy is still viewed with caution, but the positive trend of the last three quarters has proven stable. The company-specific prospects have turned even more for the better. Nearly half of the CFOs polled see the possible end of the Schengen agreement as a danger for their own companies. On the other hand, a majority expects very little in the way of adverse effects from the possible Transatlantic Trade and Investment Partnership (TTIP) or from a potential British withdrawal from the EU (Brexit).

From the perspective of the 116 Swiss-based CFOs surveyed, the quarterly comparison shows an improvement in the overall business outlook: 27% expect positive developments while just over half don’t anticipate any change. About two-thirds (64%) are forecasting increased sales volumes over the next 12 months and 18% see those figures falling. Margins, however, will remain tight: 41% expect them to shrink while 27% think operating margins will rise.

Economic expectations – uncertainty still looms large

Expectations among CFOs regarding the broader economic situation are stable but remain slightly negative overall: One in four (24%) are optimistic about the Swiss economy for the next 12 months, while 28% are pessimistic. The still-cautious mood can also be seen in the perceived level of economic and financial uncertainty: 69% of the CFOs surveyed see the level of uncertainty as high (compared to 81% in Q1 2015), and 30% (19%) see it as normal.

Michael Grampp, Chief Economist at Deloitte in Switzerland: “The economic outlook among Swiss CFOs will remain stable, and yet there is a palpably high level of uncertainty. The main indicator of that is the decreasing readiness to take risks. Only one-fifth of those surveyed say they want to take more risks with their balance sheets at the moment. It follows that 88% state that they will keep a strategic focus on cost controlling. Cost reduction measures also remain a focus. On a positive note, organic growth, market expansion and the introduction of new products and services are also frequently cited as main priorities at the moment.”

The CFO Survey was also carried out in various other European countries in the first quarter of 2016. A comparison of the results shows that an aversion to risk is widespread among CFOs. In Germany and Austria, the willingness to take higher risks is even more muted than in Switzerland. In Great Britain on the other hand, it was slightly higher, but with the Brexit debate in full swing, that readiness to take risks has been cut in half in the last months (47% readiness to take risks in Q3 2015). The biggest risk-takers are the CFOs in Spain and Italy.

External risks dominate – Brexit and TTIP are not a concern in Switzerland

In Switzerland, 67% of CFOs see the development of the Swiss franc as the greatest factor for uncertainty at their own companies, followed by geopolitical dangers (63%), weak domestic demand and increased regulation in Switzerland (both 56%).

Almost half (44%) of the CFOs surveyed see negative effects for their companies should the Schengen agreement fall apart. In addition to the effects on the movement of goods, there is a fear that the movement of skilled workers in particular would be greatly limited.

On the other hand, a majority (80%) of the polled CFOs expect no effects on their own companies if the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the USA goes through; 14% see it as potentially having a positive effect.

17% of Swiss CFOs anticipate negative effects on their companies from a possible withdrawal by Great Britain from the EU (Brexit), while 80% see it as neither good nor bad. This particular subject was met with substantially more pessimism in other countries. In Great Britain 75% of the companies are of the opinion that it should stay part of the EU. In Ireland, 58% would expect negative outcomes from a Brexit and in the Netherlands it was 44%.