Multinational companies remain a key pillar of the Swiss economy. Although they account for only around 6 percent of all companies in the country, they generate 42 percent of Switzerland’s gross domestic product (GDP), according to a study by McKinsey on Switzerland’s competitiveness.

Since 2014, multinational companies have generated around three-quarters of Switzerland’s nominal economic growth. At the same time, concern is growing among corporate executives that Switzerland is losing some of its appeal in the international competition for business locations.

Deterioration in Key Location Factors

The study by McKinsey and the Swiss-American Chamber of Commerce is based on a survey of corporate executives. Around 70 percent of CEOs surveyed say Switzerland has deteriorated relative to international business hubs in at least three key location factors.

Regulatory conditions, the tax environment and infrastructure are viewed particularly critically. Around 70 percent see a deterioration in the country’s «ease of doing business,» citing regulatory complexity and slow processes in particular. Some 65 percent see disadvantages in the tax environment, including those related to the OECD global minimum tax. Another 60 percent point to infrastructure bottlenecks.

The benchmark against which companies assess Switzerland has also changed. Around 80 percent of respondents say they now compare Switzerland not primarily with other European countries, but with global hubs such as the United States, Singapore and the United Arab Emirates.

Switzerland Gains Ground in Research and Technology

Not all location factors are moving in the wrong direction. Switzerland remains strong in talent, innovation and research, according to the CEOs surveyed. More than 85 percent continue to regard talent and innovation as key strengths. Switzerland is also gaining importance in research and development, as well as in technology and artificial intelligence.

The shift is also reflected in the location decisions of multinational companies, the study says. Switzerland’s share of relocations and new locations for global corporate headquarters has increased from 15 percent to 22 percent.

Losing Ground on Headquarters Functions

At the same time, Switzerland has lost ground in headquarters functions in several major industries. In pharmaceuticals and healthcare, its share declined from 46 percent to 32 percent, while in industrial companies it fell from 27 percent to 16 percent.

Overall, Switzerland remains Europe’s leading location for research and development, but it is attracting fewer global headquarters and corporate control functions than in the past.

«Switzerland’s competitiveness can no longer be taken for granted,» said Michael Steinmann, managing partner of McKinsey Switzerland. Investment decisions that increasingly favor other international hubs are an important signal of the country’s long-term attractiveness as a business location, he said.

Speed Becomes a Competitive Factor

According to the executives surveyed, Switzerland’s competitive disadvantage does not primarily stem from individual regulations. More problematic is the cumulative effect of numerous small delays — including lengthy approval processes for infrastructure projects and work permits for international talent.

Geopolitical tensions, new trade barriers, uncertainty surrounding relations with the European Union, the OECD global minimum tax, a more active U.S. trade policy and the strong Swiss franc are adding to the pressure. For internationally active companies, these factors are increasing the need to compare business locations around the world.

Rahul Sahgal, CEO of the Swiss-American Chamber of Commerce, therefore sees a particular need for greater speed and reliability. Switzerland cannot compete with larger economies on market size or subsidies, he said, but it can outperform them through efficiency, speed and reliability.

Five Priorities for Switzerland’s Business Environment

The study identifies five key areas for action: attracting international talent, accelerating regulatory processes, improving tax predictability, investing in infrastructure, and developing a more strategic positioning for Switzerland vis-à-vis the European Union, the United States and Asia.

The goal, the authors argue, is not deregulation at any cost. Rather, the focus should be on effective, proportionate and predictable rules that enable investment, innovation and economic growth.