Swiss and foreign companies continue to withdraw investments
Published: Friday, Dec 15th 2023, 10:10
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Companies based in Switzerland once again withdrew massive amounts of capital from their foreign subsidiaries in 2022. However, foreign companies also repatriated their capital from Switzerland.
In total, companies based in Switzerland withdrew CHF 71 billion from their subsidiaries abroad in 2022. This continues the trend of previous years, as reported by the Swiss National Bank (SNB) on Friday. In 2021, however, disinvestments were slightly higher at CHF 111 billion.
As in previous years, it was mainly companies from the services sector that transferred money back. However, it was not almost exclusively finance and holding companies (CHF 26 billion) as in the past. Other service sectors also significantly reduced their financial investments abroad.
First and foremost, the transportation and communication sector accounted for CHF 29 billion. Disinvestments in banks amounted to CHF 19 billion.
Overall, only a few sectors invested abroad on balance. In the services sector, it was mainly insurance and trade, with CHF 6 billion and CHF 4 billion respectively. In industry, direct investment was highest in the metals and machinery sector group at CHF 5 billion.
Switzerland has traditionally been one of the world's largest direct investors. The reasons for this include the numerous headquarters of large multinational corporations and Switzerland's attractiveness as a location for foreign-controlled holding companies.
Money mainly flows out of Europe
The largest outflow of direct investments was from locations in Europe (CHF 42 billion). The typical holding locations in Cyprus, the UK and Luxembourg were particularly affected. However, there were also significant withdrawals of CHF 34 billion from the offshore centers of Central and South America.
In Asia, on the other hand, there were slight inflows of CHF 8 billion. Singapore and South Korea were the main beneficiaries.
The stock of direct investments abroad fell significantly to CHF 1,319 billion from CHF 1,452 billion. Equity capital accounted for the lion's share. A small proportion also consists of intercompany loans. With a share of almost 40 percent, finance and holding companies account for the largest share. Companies in the chemicals and plastics industry group follow well behind with 15 percent.
Foreign holding companies withdraw money from Switzerland
Investors from abroad also withdrew funds from Switzerland once again. However, at CHF 58 billion, the decline was significantly lower than in the previous year, when a total of CHF 133 billion flowed out.
As in previous years, the withdrawal of funds was mainly attributable to finance and holding companies, which withdrew CHF 70 billion. According to the SNB, companies are thus continuing the balance sheet reductions they have been implementing since 2018.
By contrast, foreign companies invested more heavily in their subsidiaries in the trade sector (+CHF 11 billion) and the chemicals and plastics sector (+CHF 9 billion). In the trade sector, profits in particular were reinvested and in the chemicals and plastics sector the increase was due to takeovers, the SNB writes further.
The stock of foreign direct investment also fell significantly to CHF 1,055 billion from CHF 1,120 billion in 2021.
Number of employees increases slightly
The Swiss companies surveyed by the SNB reported that they controlled around 20,300 subsidiaries abroad. They employed almost 2.3 million people in these subsidiaries, which is around 3% more than in the previous year. Their turnover even rose by 8 percent to 887 billion Swiss francs.
The groups are also significant employers in Switzerland. The number of employees rose slightly to 538,500 in 2022.
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