Surveys show that Switzerland is the happiest and most competitive country in the world. But to do business there, it’s worth debunking the chocolate and cuckoo clock clichés first
Last July in the chi-chi resort of Zermatt, only one name was on everybody’s lips: Edward Whymper. Townsfolk dressed in his trademark tweed, theatres staged plays recreating chapters from his life, mountain climbs were dedicated in his honour: all celebrating the 150th anniversary of Victorian alpinist Whymper scaling the 4,478m-high Matterhorn in 1865 – an event proving that when the British and Swiss put their minds together, truly epochal things can happen.
It’s also worth considering that if Tim Berners-Lee hadn’t developed HTML with Swiss colleagues at Geneva’s Cern research centre in 1989, the internet could still be the domain of tech-obsessed scientists. By acquiring Rowntree Mackintosh and Crosse & Blackwell, meanwhile, Nestlé has become the largest food group in the world. And today’s $70bn (£45bn) global ski industry might not exist were it not for plucky, wooden-skied British eccentrics pioneering winter sports in 19th-century Switzerland.
The Anglo-Swiss union (not for nothing do the two countries top Insead’s Global Innovation Index) endures to this day, with bilateral trade standing at £28bn a year. In 2012, the Swiss bought £9.1bn worth of UK services – more than the Bric states together.
“You might think Switzerland is a small country in Europe keeping itself apart, but it’s very much like Britain,” notes Geoff Linsell, managing director of Moving Brands Zürich. “There’s a lot of commonality between the two cultures.”
Indeed, despite lying slap-bang in the centre of Europe, there is arguably more ignorance surrounding Switzerland than any other continental country. Tourism ads depicting steam trains chugging through Heidi-postcard scenery creates the myth that the Alpine state also has a slow-paced business environment, something its position atop the WEF’s Global Competitiveness Index belies.
Stereotyped as an ultra-sanitised tax haven, a stroll through Zürich’s gritty-but-creative Langstrasse (home to Moving Brands) smudges that illusion. Meanwhile, the cliché that Swiss society is parochial and secretive (hardly helped by Fifa’s recent turmoil) is quashed by stats showing that over 20 per cent of the population are foreigners, including 43,000 Britons.
Opportunity for UK firms
Nearly 17,000 of these live in the Lake Geneva region, many working for supranationals such as the UN, World Health Organization, the Red Cross and Cern – all headquartered here. Healthy budgets (procurement by UN offices worldwide was £9.2bn in 2012 while Cern’s business opportunities total £160m a year) present opportunities for British goods and services.
Oxfordshire-based AS Scientific has been providing cryogenic equipment to Cern since the late 1980s, including a £2m five-year contract for the Large Hadron Collider. “Contracts for Cern are tender-based with various companies bidding,” says sales director Paul Wiggins. “It’s definitely worth arranging a visit, getting your name out there so when [projects] happen, you’re in the mix… Plus, there’s kudos if you say that you’ve worked at Cern. Off the back of our Cern work, we picked up another €12m (£8.49m) contract.”
Delivering English-language training courses to the region’s multinational staff was an opportunity Bill Morrison spied when buying the Swiss franchise of Sandler Training in 2009. After a spell “working from cardboard boxes and cold-calling”, Sandler Training Switzerland has enjoyed constant growth, teaching mainly private sector companies. “There has been a lot of growth in corporate education in recent years,” says Morrison. “We’re lucky to have picked a place with such a high concentration of decision-makers.”
Over in German-speaking Switzerland, Basel has become Europe’s pharma capital. Native firms Novartis and Roche are headquartered there, while its Rhine port – rare in this landlocked country – transports goods worldwide (the pharmaceutical industry is responsible for a third of Switzerland’s exports).
“Companies are discovering and developing drugs here, so there’s lots of funding available,” notes Dr Richard White of Oxford PharmaGenesis, which provides communications-based services to key pharma companies.
Despite White noting that around 45 per cent of the company’s £15m turnover comes from Switzerland, the Basel office of Oxford PharmaGenesis employs two people. Although the firm plans to expand its Basel office, headcount is micro for a rational reason: the Swiss are paid the highest wages in the world (average professional starting salary: £66,671). As White says: “A person of a specific skills set will cost 40-50 per cent more to employ in Switzerland compared with the UK.”
Moving Brands Zürich similarly employs two people. “To grow a big studio, like in London, would be uneconomic,” reckons Linsell. Swiss Business Hub’s Geraldine Mortby points out that although wages are “generous”, productivity is high with staff paying their own health and national insurance. “In most cases, setting up takes two to four weeks, costing around CHF5,000 (£3,270),” she says, adding Swiss Business Hub can fund gratis fact-finding missions.
Befriending the local canton offices is also crucial. “Cantons rule Switzerland – they’re infinitely more powerful than the federal government,” says Morrison, of the country’s 26 administrative sub-divisions which set corporate tax rates plus assist in everything from business registration to work permits. “If we want something done, we go to the syndic (mayor). It’s upside-down compared to the UK.”
With canton corporate tax rates ranging from nine to 24 per cent, it’s worth playing the canton market. “Realising just how decentralised Switzerland is can be a learning curve for British people,” adds Linsell. “Targeting the right canton could mean different levels of taxation or bureaucracy for your business.”
A good example is the city of Zug. Thanks to its canton’s generous tax breaks, corporations have flooded in, including Boots, which relocated its HQ here in 2009. The once-sleepy lakeside town has been transformed into a global economic hub, with 30,000 registered companies – more than its population.
That taxing issue
Despite Switzerland’s tax haven status (it isn’t a crime for Swiss banks to assist legal tax avoidance), British business-leaders stress they aren’t there for the tax breaks.“It’s number five on the list of priorities,” says Paul Cowan of blood transfusions diagnostics firm Quotient (see Case study, below). “If I could get the tax breaks but couldn’t recruit the people or access customers then I wouldn’t have built here.”
On the surface, business seems unproblematic for expat firms. In many industries, English is the lingua franca whether it’s the supranationals (Wiggins: “At Cern, you have to speak English – German or French isn’t a prerequisite”), pharma (White: “You’ll hear people speaking German socially but using English as their business language) or corporate education (Morrison: “Even Glaswegian English is understood!”)
With Zürich and Geneva both mainstays in Mercer’s Quality of Living survey (second and eighth respectively), living standards are exceptionally high too. “We watch BBC morning news, see the M25 and the weather forecast, and think ‘We’re never coming back,’” says Morrison.
Switzerland’s absence from the EU hasn’t caused complications. “I can’t think of any bearing it’s had,” says Linsell. “You can spend euros on the streets, Swiss banks recognise them, while you can move around the continent easily [Switzerland is a Schengen state].” By not adhering to EU standards, though, Morrison has noted “health and safety is more laissez-faire. Hard-hats and harnesses on building-sites are unknown.”
Nevertheless, challenges remain. Recruiting is costly, due to aforementioned high wages. The Swiss-German love of notarisation – the legal certification of documents or signatures – can be irksome too. “When we started, I was struck by the fact there was yet another form I needed to get notarised, paying somebody in francs to witness the signature,” says Linsell.
Cost of living
Living amid those sparkling lakes and glacier-studded mountains has drawbacks too, namely expense. Switzerland has topped The Economist’s Big Mac Index for some years (current price: £4.37) while health insurance is mandatory (currently CHF396 a month). To cut costs, AS Scientific employees prefer to commute to Cern from across the border, in France.
Still, Switzerland powers on quietly, providing an agile environment for business, silently topping happiness and innovation indexes alike. Its lack of braggadocio can lead to accusations of furtiveness, but according to Morrison, the Swiss have one important business secret of their own. “There’s a general rule in every part of Swiss administration and legislation where the logical answer is always the right one,” says Morrison.
This Swiss logic may have helped Whymper and Berners-Lee with their discoveries, but British businesses would be equally well-advised to leave any preconceptions behind at the border. “If you’re thinking about coming to Switzerland, come with no assumptions,” says Morrison. “It’s a Case Studysurprisingly open place.”
Case study: Quotient
Quotient, which manufactures and supplies immunohaematology [blood-banking] products to hospitals and blood banks across the world, moved to Switzerland two years ago (the country is a major incubator of health companies, with its annual expenditure of CHF68bn, or £44.3bn, more than any other nation bar the US).
Searching for a manufacturing facility, Quotient eventually stumbled upon a former Kraft/Cadburys R&D centre in Eysins (part of the so-called ‘Health Valley’ bio-med cluster near Geneva), moving there in late 2013.
Says chairman and chief executive Paul Cowan: “That building suited our purposes with equipment we could use. We moved in quickly, cutting 12-18 months out of the commercial scale of the timetable.” Furthermore, with Europe being Quotient’s biggest market (by volume), Cowan says: “We can ship product to any of our continental customers and it would take less than 12 hours. All very critical.”
Starting off with just two employees, Quotient has managed to expand its multinational workforce to 50-plus by accessing the region’s “fantastic talent pool”.
“We’ve been able to tap into talented people who’ve had exposure to the FDA [Food and Drug Administration], which is critical for our US market.” The local Vaud canton was particularly helpful. “If there’s a specific local regulation you need to comply with, they’ll point you in the right direction – a lot of inward investment opportunities are encouraged and managed by the cantons”.
As Quotient is “an English-speaking operation”, Cowan’s had little chance to use his admittedly “poor French” while the only repercussions from last January’s removal of the Swiss franc cap, was that Quotient’s French workers “effectively got a 20 per cent pay rise”.
With the company in talks with Geneva-based Swiss Red Cross, Cowan says: “If you’re a labour-intensive business, you’re not going to build it in Switzerland. If you’re not labour-intensive, then you can absolutely be there… [I’ve found] there are no major impediments to doing business there.”
Read more in this series on doing business in Switzerland
Helpful links for doing business in Switzerland
Follow the BSCC on Twitter @The_BSCC
Follow CERN on Twitter @CERN
Follow Geoff Linsell on Twitter @addingtonsq
Follow Oxford PharmaGenesis on Twitter @OxPharmaGenesis
Follow Switzerland Global Enterprise on Twitter @SGE
Dr Richard White is a member of IoD Oxfordshire