Covid 19 crisis: SMEs reacted quickly
The situation of SMEs in the MEM sector deteriorated dramatically in the wake of the Covid 19 crisis in April. However, the response was swift: 67 percent applied for short-time work and 34 percent for a bridging loan. Only 16 percent had to announce layoffs.
SMEs in the MEM sector have responded quickly to the challenges of the Covid 19 crisis: One-third have applied for a government bridging loan, and two-thirds have registered for short-time work. In addition to taking advantage of government measures, businesses are also putting the brakes on costs: for example, 16 percent have made redundancies, 72 percent have put a hiring freeze in place and 68 percent have put a freeze on investment.
Covid 19 crisis hits MEM sector twice
These measures were unavoidable. The quarterly survey of over 400 companies conducted by Swissmechanic and BAK Economics in April shows that the pandemic is hitting the Swiss MEM sector twice. On the one hand, smooth production is being affected: 42 percent of the companies surveyed report interruptions in their supply chains, while 25 percent report staff absences due to illness, quarantine or care obligations. Second, SMEs are suffering from a pronounced slump in demand. Due to the global recession, the sharp rise in uncertainty and the increased need for liquidity, customers in the MEM sector are putting the brakes on investments.
Business climate index deteriorates significantly - further slump expected in Q2
The strains on the supply and demand side are leaving their mark. The Swissmechanic Business Climate Index for SMEs in the MEM sector makes it clear that the climate, which was already pessimistic last fall and winter, has again deteriorated significantly in April 2020. The SMEs surveyed have no illusions about the second quarter of 2020, with an overwhelming majority (82%) expecting orders to slump further.
Strong catch-up effects in 2021 and 2022 if pandemic remains under control
Only 6 percent see a seriously increased risk of bankruptcy for themselves, which proves that companies are looking beyond the current storm. If, as assumed in BAK Economics' baseline scenario, the pandemic can be brought under control in the summer, the industry can expect to see extremely strong catch-up effects in 2021 and 2022.
The federal government's aid package, consisting of bridging loans and the extension of short-time work compensation, has helped many SMEs to make ends meet in the short term. The worst has thus been averted for the time being. In view of the uncertainty about future developments, the term of the bridging loans should be extended to 8 to 10 years. At the same time, Swissmechanic is demanding that the guaranteed loans be regarded as loans with subordination under notary law in order to minimize the risk of overindebtedness.
Source: Swissmechanic
