Lack of orders in the MEM sector: a "toxic cocktail" of reasons

The 243 SMEs from the MEM sector surveyed by Swissmechanic and BAK Economics in October continue to report employee absenteeism (15% of companies) and disruptions in often complex supply chains (17%). "However, the lack of orders is having an even greater impact, with 82 percent of survey participants suffering," says Swissmechanic Director Jürg Marti. The culprit, he says, is a toxic cocktail of low capacity utilization among customers in the MEM industries, high uncertainty about the further course of the pandemic and the economy, increased liquidity requirements and a strengthening Swiss franc.

Downward momentum slowed slightly

In the third quarter, the downward momentum in new orders and sales slowed slightly. Exports and the PMI also indicate that the recession in the MEM sector bottomed out in the second quarter of the year. However, the industry is not out of the woods yet, according to another conclusion of the survey. Despite short-time work and hiring freezes (70% of companies each), the industry cannot avoid layoffs (29% of companies). Accordingly, the business climate index for SME-MEM remained at a low level in October.

Protecting the Swiss economy from further damage

In view of the still very difficult, uncomfortable situation in which many companies, especially in the MEM sector, find themselves, it is imperative to protect the Swiss economy from further damage, demands the Swissmechanic association. For this reason, there must not be a second nationwide lockdown and it is imperative that both the harmful GSoA initiative and the anti-business corporate responsibility initiative be rejected on November 29. The adoption of both initiatives would further weaken the Swiss workplace, which must be prevented at all costs, the industry association warns.

Outlook: Lack of orders will remain a problem

The industry's view of the future is mixed. The majority of companies do not expect the shortage of orders to improve significantly for the time being. On the optimistic side, more companies want to expand their capacities in 2021 than reduce them. One problem, on the other hand, is that around a third of companies state that they lack the necessary financial resources for future investments. This problem already surfaced in the survey in fall 2019, but has become even more acute with the Corona crisis. The increase in debt, the decrease in margins and the increase in liquidity requirements due to the Corona crisis are responsible for this. Michael Grass of BAK-Economics advises, "The longer investments in future technologies and business models are postponed, the more the competitiveness and long-term growth potential of the MEM sector will suffer."

Source: Swissmechanic