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Alessandro Crinari
In the previous year, Swiss-based companies had invested 44 billion net Swiss francs abroad, as the Swiss National Bank (SNB) announced on Friday.
So far, direct investment has fallen into the red for the moment, as a look at SNB statistics shows. In 2014, however, the deduction was only 259 million Swiss francs. Otherwise, Swiss companies have always invested more abroad than they have withdrawn.
Switzerland is traditionally one of the largest direct investors in the world. Reasons for this include the numerous headquarters of large multinational corporations and the attractiveness of Switzerland as a place for foreign-controlled holding companies.
Now it was the other way around in 2019: according to SNB, service sector companies made record withdrawals of CHF 53 billion after investing CHF 29 billion abroad in 2018: commercial companies withdrew CHF 27 billion in credit transactions intra-group and other services 17,000 million Swiss francs flowed from abroad.
Outflows from financial and holding companies amounted to 20 billion Swiss francs. That is also a new record. “In particular, as part of the corporate restructuring, they reduced the share capital of subsidiaries abroad,” says the SNB report.
In contrast, the industry invested 11 billion across the border. The largest investors came from the group of branches “Other industries and construction”.
According to the SNB, the withdrawals mainly affected subsidiaries in Europe (36 billion). The deciding factor was the high outflows at the holding locations in Luxembourg and Ireland.
By contrast, domestic companies increased their investments in most other European countries: most in Hungary, but also in Great Britain, Germany and Belgium, the SNB noted.
Outside of Europe, withdrawals also predominated in Latin America (11 billion) and Asia (8 billion). By contrast, North America (11 billion) and Africa (3 billion) were the only regions that recorded an inflow of Swiss direct investment together.
After the record of the previous year (1,460 billion), the share capital also contracted for the first time since 2014. The volume of direct investment abroad was 1,445 million Swiss francs last year. Swiss companies accounted for 989 billion of this (excluding foreign-controlled portfolio and finance companies).
At 580 billion Swiss francs, financial and holding companies had by far the largest share capital abroad. Most of this was controlled by foreigners (456 billion), as SNB statistics show. The chemicals and plastics industry ranked second with 177 billion Swiss francs.
The workforce also fell: Swiss-controlled companies surveyed by the National Bank employed some 2 million people in their subsidiaries abroad. That is 54,000 less than the previous year. These groups are also major employers in Germany, where they have 547,000 employees.
There were also exits in the opposite direction: in 2019, investors abroad drew a balance of 79 billion companies in Switzerland. That is also a new record. In 2018, withdrawals totaled 67 billion. Before that, there had never been runoff in the double-digit billions in history.
There were large withdrawals of funds in intra-group credit transactions (50 billion), of which, according to the SNB, the restructuring of the group was the main responsible.
However, as in the previous year, the registered capital was also reduced due to the tax reform in the US: It was used by US parent companies to repatriate part of the capital reserves of subsidiaries in Switzerland.
