Last reviewed 9 February 2021
One of the world’s wealthiest countries, landlocked Switzerland is keen to do more business with the UK in the wake of Brexit.
A small, mountainous country in central Europe, Switzerland punches above its weight in economic terms with its 8.5 million people among the richest in the world on a per capita basis (US$82,950 in 2018 compared to the UK’s US$42,560, according to the International Monetary Fund).
Its long-standing position on neutrality has given it a much-envied stability even during the darkest of times, including the chaotic years of the Second World War. The country — a federal republic composed of 26 cantons — has been a neutral state for centuries and cannot take part in any armed conflict unless it’s attacked and in self-defence.
On all sides, landlocked Switzerland is surrounded by member states of the European Union (EU) — France, Germany, Austria and Italy, as well as the small principality of Liechtenstein — yet still proudly boasts its own unique currency (the Swiss franc) and independence, despite deep and entrenched links with its close neighbours.
The three main languages spoken — German, French and Italian — reflect its strong links with all of the countries and economies at the heart of the EU, on which it depends for access by land.
While Bern is the political capital, Zurich, Geneva and Basel are the primary international commercial centres and arrival gateways — these cities host international organisations such as FIFA, the World Economy Forum and the Bank for International Settlements. The EU, particularly Germany, remains its number one trade partner, but is closely followed by the USA and the UK, underlining the Swiss’ global outlook.
Yet trade with the EU is currently held back as the two sides negotiate a pact that would bring together a patchwork of 120 treaties and bilateral accords — partly because Switzerland withdrew an application to join the EU in 2016.
It highlights the Swiss’ flirtation between globalism and isolationism, vacillating between seeking closer engagement, and preferring a more isolationist course; the country only joined the United Nations in 2002.
Politically, Switzerland also maintains its own course with a unique system of direct democracy, giving citizens a direct say on national issues via a system of polls to vote in key referendums and people’s initiatives. This includes, in 2020, a decisive vote on whether to end an accord with the EU allowing the free movement of people — almost two thirds voted to keep free movement last September. The outcome reflects Switzerland’s deep level of integration with its near neighbours and reliance on free movement, in both directions, which also underpins trade flows in physical goods.
More than three quarters of Swiss imports come from the EU, including the raw materials for its own successful export sector. Much of Switzerland’s economic success has been built on its highly-sophisticated services sector, with major exports from chemical and pharmaceutical products, to machinery and electronics. It is also renowned for its luxury items including watches — this is the home of high-end brands like Rolex, TAG Heuer and Omega — as well as food products such as cheese and chocolate.
Trade & investment
Switzerland’s independence from the EU has meant it has found a new ally in Britain, in the wake of Brexit. Already a key trade partner, the UK signed a deal on services with Switzerland in December to support industries including finance, legal services, consultancy, the tech sector and the creative industries.
Among other things, the Services Mobility Agreement provides continuity for UK businesses, professionals and other service providers to continue working freely in the country for up to 90 days a year. The bilateral services relationship supports many thousands of jobs, businesses and professionals on both sides.
“This deal between two services powerhouses is an important part of our mission to be a global hub for services and technology trade,” said International Trade Secretary, Liz Truss, announcing the deal at the end of 2020. “I hope it will pave the way for an enhanced UK Switzerland deal in the future.”
It also builds on an existing UK-Switzerland trade pact which, together, will support over £37 billion (US$50 billion) worth of trade, ensuring low or zero tariffs access for thousands of products including cars, medicines and watches.
The UK and Switzerland have also committed to work together on mutual recognition of professional qualifications to make it easier for British professionals, from accountants to architects, to practise in both territories. One immediate advance post-Brexit is that Switzerland’s government is again permitting Swiss stocks to trade on London’s financial markets again.
It follows a year-and-a-half ban after Brussels stopped EU investors from trading on Swiss exchanges in June 2019 after a treaty row — Switzerland then banned EU exchanges, including the UK, from trading Swiss shares. The move was confirmed by the Swiss Financial Market Supervisory Authority (FINMA) in February.
Major Swiss stocks range from financial groups like Credit Suisse and insurer Swiss Re to pharmaceuticals giant Novartis and Adecco, the world’s largest employment agency. It is not just these and other large companies doing business, however — most bilateral trade is made up of countless small and mid-size firms. Around 15,200 VAT-registered UK businesses exported goods to Switzerland in 2017, according to the Office of National Statistics (ONS).
Behind this, there are many other reasons why the UK and Switzerland maintain such close ties. The country is now the UK’s eighth largest export market, according to the ONS, and very receptive to new, high-quality products and services.
In advanced industries, Switzerland is among the UK’s most important science and innovation partners, which underscores the importance of the new Services Mobility Agreement. It also highlights the sophistication of the market overall and its tech-savvy consumers.
Kare Knowledgeware, a British AI start-up in automated knowledge management and customer support, expanded its business to the city of Lausanne in order to benefit from the tech talent pool there and commercial opportunities.
“Lausanne will be one of the AI capitals on the European continent,” said Dr Michele Sama, chief technology officer, speaking in an interview with Switzerland Global Enterprise (S-GE), the official investment promotion agency.
“It is fuelled by a strong supply of new talent from local universities, technical resources, vibrant open communities driven by research, and support from local governments.”
Sama also cited the city’s cosmopolitan environment, as well as reduced overall recruitment and training costs due to a ‘long-term’ mentality. In practical terms, too, English is widely spoken and the two nations are well connected by air, with flight times under two hours and typically more than 130 flights per day.
While there are clear links with EU markets, there are subtle differences too: Switzerland, for instance, has different product safety requirements from the EU, not to mention its own currency. In the other direction, Swiss interests in the UK extend far beyond selling cheese and chocolate.
SUSI Partners, a fund manager based in Switzerland, this year acquired three lithium-ion battery storage assets from Eelpower, an owner-operator of sustainable power infrastructure in the UK.
The two companies have also formed a broader partnership for the development of battery storage assets, with the acquisition of an additional ready-to-build 50 megawatts (MW) battery storage project in Scotland. It marks the Swiss firm’s first investment in the UK’s dynamic and evolving energy storage market.
Investors on both sides are supported in the UK by the Swiss Business Hub, an arm of S-GE, and a part of the embassy in London. It is responsible for promoting Switzerland as a business location and supports UK companies in setting up entities or research and development collaborations in Switzerland.
With its high standard of living and stable political, economic and financial framework, it is no surprise that business interest is thriving, fuelling Switzerland’s continued prosperity. However, the country’s striking natural beauty, traversing the Alps, brings visitors for plenty of other reasons too.
It is a world-famous ski destination, boasting major resorts such as Zermatt, St Moritz and Verbier, among others, including Klosters, where the British royal family, notably Prince Charles, are known to frequent on a regular basis.
During the summer months, these same areas attract thousands of tourists for their hiking and biking trails too, as well as their scenic beauty. The Foreign & Commonwealth Office estimates that around one million British nationals visit Switzerland each year (pre-Covid).
The most iconic of mountains is the Matterhorn, a near-symmetric pyramidal peak that straddles the border with Italy — standing 4,478 metres high, and one of the highest summits in the Alps, it has long beguiled the climbing community.
Visitors to Switzerland also enjoy the unique Alpine culture of the mountains from traditional villages, with their quaint wooden houses and cuckoo clocks — a reminder of the local fascination for good timekeeping — to gooey cheese fondue at suppertime. And, in the cities, there are famed landmarks to discover and explore from Bern’s Zytglogge clock tower to Lucerne’s charming wooden chapel bridge.
On top of this, the cultural side of Switzerland, from its Alpine architecture and ancient markets to international events like the Montreux Jazz Festival are renowned worldwide, and draw visitors the world over. For those looking for stability, security and spectacular scenery, Switzerland has it all.