Switzerland’s competitiveness: Why multinationals choose HQs

Switzerland remains structurally strong, but its competitive edge is no longer self-sustaining. The global landscape has shifted due to emerging geopolitical uncertainty, shifts in industrial policy, and economic fragmentation. In this environment, according to Avenir Suisse, “competitiveness rarely deteriorates abruptly; it usually erodes gradually, long before headline indicators deteriorate.” Our research, which includes more than 60 interviews with executives from Swiss-based MNCs, confirms that Switzerland continues to rank among the most attractive business environments globally, particularly in terms of political stability, infrastructure quality, talent availability, and institutional reliability (see sidebar, “More than 60 interviews with CEOs of leading multinationals and thought leaders provide a unique assessment of Switzerland’s competitiveness”). At the same time, expectations have evolved, and companies now increasingly compare Switzerland not only with European peers but also with global hubs such as the United States, Singapore, and the UAE.

Across interviews and data, five decisive factors consistently emerge: the depth and scalability of talent and innovation; the speed and predictability of regulation; fiscal clarity and competitiveness; the capacity and reliability of infrastructure; and Switzerland’s international positioning and market access (Exhibit 9).

Compared with 2019, the fundamentals remain strong, but pressures have intensified (Exhibit 10). Talent excellence is intact, yet scalability constraints are more visible than ever. Regulatory quality remains high, but decision timelines have become less predictable. As one pharma CEO noted, “political stability is an advantage, but when no one can decide, it becomes a disadvantage.” Fiscal credibility is solid, although differentiation has decreased. Infrastructure remains world-class, but the pace of expansion has become more critical. In fact, during our interviews, it emerged that “we need to execute in days, not years.” Incremental friction compounds over time.

Talent and innovation base—structurally strong but under increasing pressure

Switzerland’s talent and innovation base remains one of its strongest structural advantages. The dual-track education system combines elite academic research at institutions such as ETH Zurich and EPFL with applied industrial skills developed through apprenticeships (see Background, “Switzerland’s apprenticeship system”). As such, the country continues to attract highly skilled international talent, supported by research excellence, institutional stability, and a high quality of life, representing a model that fosters productivity and close links between research, industry, and commercialization.

Background: Switzerland’s apprenticeship system

Switzerland’s dual apprenticeship system combines paid, company-based training with vocational schooling, providing a direct transition from education to skilled employment. Around two-thirds of young people pursue vocational education after compulsory schooling, typically through a three- to four-year apprenticeship.

Training content is employer-led and nationally standardized, ensuring close alignment with labor market needs. The system is flexible, allowing graduates to progress to higher professional education or universities of applied sciences.

Source: OECD, Vocational education and training in Switzerland, 2020

Switzerland continues to generate leading-edge innovation and attract top talent in artificial intelligence, deep tech, blockchain, pharmaceuticals, medical technology, precision mechanics, sensor technology, and aerospace. These strengths enable the formation of highly specialized clusters that capture value across the innovation chain, from R&D through advanced manufacturing and services. Google’s Zurich expansion, for example, was driven by “the quality delivered” and close integration with ETH and EPFL. Switzerland competes on excellence rather than scale, producing globally competitive niche champions.

However, pressure points are emerging. Increasing fragmentation and equalization of research funding across universities in Switzerland risk diluting elite science and weakening Switzerland’s competitive position relative to US elite universities. This risk is visible in recent grant data: ETH Zurich secured 79 European Research Council (ERC) grants between 2017 and 2020, compared with 48 in the subsequent four-year period, when Switzerland operated under transitional funding arrangements. While these measures ensured continuity, they led to a more even distribution of funding across institutions and lower overall success rates, reducing the concentration of resources at leading universities.

While Switzerland remains highly attractive to senior scientists and technical leaders, companies are increasingly struggling to scale teams beyond an initial core. Hiring specialized software engineers, applied AI specialists, and product managers can take between 9 and 12 months, and work-permit processes for non-EU profiles remain unpredictable. As a result, many firms anchor research leadership in Switzerland but consider relocating the build-and-scale phase to locations with larger talent pools and faster hiring cycles.

Regulatory and institutional framework—from pragmatic advantages to growing friction

Historically, Switzerland benefited from liberal, predictable, and pragmatic regulations that encouraged experimentation while maintaining stability and close coordination between authorities and businesses. Liberal labor laws (which continue to drive hiring in Switzerland, unlike in other European countries where such laws are “prohibitive”; see sidebar, “Switzerland’s liberal labor law advantage needs to be defended”); sector-specific flexibility, and a strong rule of law supported innovation and productivity across industries. This is often complemented by hands-on engagement from local and cantonal authorities that can quickly resolve issues and cut through administrative bottlenecks.

In recent years, this advantage has eroded. According to Avenir Suisse, “rising regulatory density has shifted the focus from enabling outcomes to preventing risks.” This is particularly visible in sustainability-related regulations, where expanding environmental, social, and governance (ESG) reporting and due diligence requirements have increased compliance complexity and administrative effort for MNCs operating in Switzerland.

A shift toward more rule-based compliance—resembling EU-style administrative approaches—has led to increased regulatory density across multiple sectors. Sector-specific regulations now govern areas such as labor law, capital requirements, autonomous driving, and construction approvals. The introduction of additional procedural layers has also extended approval timelines (see the Deep dive, “When sequential approvals miss global rollout windows”).

A pharma executive described the process of negotiating pricing approval for an oncology product in Switzerland. While regulatory approval was granted, the reimbursement discussion with authorities—i.e., pricing negotiations and inclusion in mandatory health insurance coverage—took close to 300 days. During that period, the product was already available in larger markets. The decision of whether to launch first in Switzerland or elsewhere now affects where clinical trials, medical teams, and related R&D investments are anchored.

Executives also highlighted examples of regulatory layering that distract from core objectives. The CEO from a chemicals company described how his team had printed the extensive documentation required under the supply chain due diligence initiative—including provisions such as calculating emissions from company car tires—while operating highly energy-intensive production facilities where decarbonization efforts are far more significant.

In addition, when Switzerland adapts or aligns certain EU regulations to maintain market access, translating them into the country’s legal framework can introduce additional complexity, further increasing regulatory layering. A financial services CEO observed that the “Swiss finish” has increased and cautioned that “overprotection slows down development.” Regulatory activity in Switzerland has expanded significantly over time, driven not only by legislation but also by secondary mandates and international agreements. Collectively, these factors have contributed to greater implementation complexity.

As regulatory requirements increase, so do the administrative apparatus needed to oversee them. Already in 2023, the percentage of government employees had grown by 13 percent over the past 10 years, significantly outpacing the 8 percent growth in the private sector. This can create a self-reinforcing dynamic: More regulations require more oversight, which in turn adds further procedural layers and slows decision-making.

A related factor frequently cited in interviews is the role of legal objection procedures (“Einsprachen”). While a core element of Switzerland’s rule of law, their increasing duration and layering have become a key source of delay, particularly for infrastructure and construction projects (see sidebar, “Objection procedures—from safeguard to bottleneck”).

Several interviewees also observed that some competing global hubs engage more proactively and visibly with resident MNCs, whereas Switzerland’s decentralized approach through the cantons can appear less assertive. This has sparked wider concerns about the nation’s inconsistent defense of its traditional location advantages, further fueling the broader Swiss economic-policy debate.

Deep dive: When sequential approvals miss global rollout windows

A regulated financial-services group planned to launch a new cross-border platform from Switzerland, valuing supervisory credibility and legal certainty. While authorities were constructive, the approval process required sequential engagement across federal and cantonal levels and more cautious interpretations following recent market shocks. The project remained viable, but approval came too late to meet a global rollout window. This tension between high-level political engagement and slower cross-level implementation was echoed by several executives, including in the pharmaceutical sector. The company launched the platform from Ireland instead, where supervisors aligned early on scope and risk, allowing development and approval to proceed in parallel within the same planning cycle.

Taxation and cost competitiveness—credibility remains strong, but differentiation is decreasing

Switzerland’s fiscal and monetary credibility remains strong. Predictable public finances, a credible debt brake, and macroeconomic stability continue to attract capital and decision-makers, particularly during periods of geopolitical uncertainty. The strength of the Swiss franc also reflects global trust in Switzerland’s institutions and economic model, while imposing continuous pressure to innovate and maintain productivity.

At the same time, Switzerland’s differentiation has decreased. The OECD minimum tax limits Switzerland’s ability to differentiate in terms of corporate taxation, which has long offset the challenges of a strong currency. Switzerland’s rigorous implementation offers limited flexibility, with CEOs pointing to a two-percentage-point margin erosion in some cases.

Several interviewees described how the OECD minimum tax has shifted internal location discussions. While Switzerland remains competitive on headline tax rates, the reduced flexibility at the margin has emphasized the importance of clarity and speed. In instances where decisions depend on timely tax rulings and clear guidance, companies increasingly compare how quickly jurisdictions can provide certainty. In some cases, investments that remained viable in Switzerland were executed elsewhere when this clarity could not be established within the required decision timelines.

These pressures are reinforced by the Swiss franc’s persistent appreciation. A stronger currency challenges export-heavy sectors such as pharmaceuticals and advanced manufacturing, and further narrows Switzerland’s margin for competitiveness. As a result, “stay versus relocate” decisions for value-chain elements become more sensitive, particularly as parts of the European industrial base become strained. While executives consistently point to the strength of the Swiss franc as a major competitiveness concern, real effective exchange rate data show a more moderate increase over the past decade, reflecting Switzerland’s lower inflation relative to peers (see Exhibit 12).

Infrastructure and physical capacity—high quality, increasingly constrained

Switzerland benefits from world-class infrastructure that supports economic performance and quality of life. Stable transport systems, reliable energy supply, and attractive public services provide a strong baseline for internationally active firms.

However, as highlighted in the interviews, infrastructure constraints are becoming increasingly prevalent. For example, a chemical company explained that it no longer produces chlorine domestically and now imports it via specialized rail transport. When the freight operator indicated capacity constraints due to profitability concerns, the company faced a direct operational risk: without chlorine, production would halt.

A global staffing company highlighted that many administrative processes in Switzerland still require physical signatures and paper documentation, whereas peers have moved to fully digital processes. While this may appear minor, at scale it increases friction for MNCs managing complex cross-border structures. Infrastructure quality is not merely theoretical—it determines whether high-value operations can continue to run in Switzerland.

Investment backlogs in energy systems and grid capacity, combined with gaps in digital and cyber infrastructure, hinder alignment with Switzerland’s ambition of being an innovation hub. Housing shortages and high costs in key urban clusters further constrain talent mobility and reduce location attractiveness. Infrastructure risks are shifting from an enabler to a binding constraint. At the sector level, these differences become more pronounced, e.g., local manufacturers face additional hurdles, as moving physical goods into, within, and out of Switzerland remains costly and restrictive regardless of the mode of transportation.

Executives consistently described Swiss infrastructure as very high quality but slow to expand and realize new projects. Several companies cited energy and grid projects—particularly renewables and transmission upgrades—as taking ten years or longer from planning to commissioning due to layered approvals and open-ended objection rights. Executives contrasted this with other European jurisdictions—including Northern Europe, Ireland, and Southern Europe—where similar industrial and energy projects typically move from approval to operation within a few years once designated as strategic. As a result, companies increasingly locate electrification and energy-intensive activities outside of Switzerland to avoid execution risk. Locally, interviewees noted that “investments in the grid are not keeping pace with projected demand growth” (see sidebar, “Switzerland’s energy supply gap”).

International positioning and market access—open economy under pressure

Switzerland remains a highly export- and knowledge-driven economy with strong integration into global value chains. Its reputation as a trusted, stable, and neutral partner continues to support international business activity, particularly in critical sectors such as pharmaceuticals, precision manufacturing, and high-end technology.

However, as geopolitical fragmentation intensifies, MNCs are increasingly adopting “in-region for region” models to reduce their exposure to trade disruptions, export controls, and the risk of political escalation. Switzerland often remains the preferred location for group leadership, intellectual property ownership, and global coordination, reflecting its reputation for trust, neutrality, and legal certainty.

Market access, talent mobility, cyber resilience, and defense capabilities increasingly require selective international integration rather than isolation. The question is no longer whether Switzerland should integrate, but where and how—while maintaining its differentiation. One tech CEO is worried that “if we mirror the EU, we lose our differentiation,” and “we really worry that we are giving up autonomy.”

Switzerland will also need to increase its speed and coordination efforts in response to growing competition in investment facilitation and support. Location decisions are steadily shifting toward jurisdictions that can bundle commitments and compress timelines across approvals, talent acquisition, and setup. Executives point to jurisdictions such as Singapore and the UAE, where regulatory simplicity and industrial policy are actively aligned with investment attraction. In these locations, investment facilitation is centralized, senior political engagement is visible, and administrative processes are streamlined to compress decision timelines. In Switzerland, in contrast, decisions typically require sequential alignment across federal, cantonal, and local levels, extending timelines beyond a single planning cycle. While this model preserves institutional balance and legal safeguards, it reduces flexibility in an environment where industrial policy, subsidies, and speed increasingly influence allocation decisions.

Beyond traditional location, several executives emphasized a less tangible but equally important factor: Switzerland’s distinct mindset. Decentralized responsibility, early accountability through the apprenticeship system, openness to international talent, and a culture of disciplined execution were described as part of the country’s economic DNA. This mindset—rather than any single policy—has historically enabled Switzerland to remain competitive despite structural constraints.

At the same time, numerous interviewees noted a changing sentiment toward growth and multinationals in public debate. In some instances, economic growth and the presence of MNCs are increasingly viewed as sources of pressure—straining housing affordability, infrastructure, and environmental outcomes—rather than as drivers of prosperity. Executives emphasized that these challenges often stem from capacity constraints, such as zoning restrictions, infrastructure bottlenecks, or energy system limits, rather than growth itself. Without a shared understanding of the role of growth and how globally active firms sustain income, innovation, and public finances, Switzerland risks weakening one of the foundations of its economic model.

Together, the recent shifts in the global environment and the gradual erosion of Switzerland’s traditional advantages present an important strategic choice. Switzerland can compete with global hubs on speed, coordination, and disciplined execution—or it can rely primarily on relative advantages within Europe. The sustainability of its economic model will depend on how clearly this choice is made.

How do location factors impact different sectors? The pharmaceuticals sector can serve as an example (see sidebar, “Switzerland’s attractiveness for the critical life science sector”). Pharmaceuticals and related industries account for roughly one-third of Swiss goods exports and represent a significant share of private R&D investment and high-value employment. As noted in recent public commentary and sector analyses, this concentration makes the sector a bellwether: Changes in life sciences competitiveness often serve as early indicators of broader structural shifts in Switzerland’s economic positioning.