On the back of the news that Switzerland is the least miserable place in the world to live according to the US Economist, Steve Hanke’s 2022 misery index, data published this week show that Switzerland also invested CHF 24.6 billion in research and development (R&D) in 2021. This amount is 4% higher than in 2019 before CV-19 struck.
According to Unesco, global spending on Research and Development (R&D) has now reached a record high of nearly US$ 1.7 trillion. Around 80% of the total spend on R&D comes from around 10 countries. Switzerland with an R&D spend ratio to GDP of 3.4% is now ranked 4th globally behind only United States (3.5%), South Korea (4.9%) and Israel (5.6%). This according to results recently publicised.
The areas of current R&D in Switzerland are lead by Higher Education which amounts to 28% of the total and private enterprises which make up 68%. The remaining 4% is derived from the Federal Government and non-profits organisations.
In terms of funding – the Swiss Government, both nationally and at the cantonal level, remained a major source of funding for R&D. The combined backing of these bodies counted for 27% of the total spend for 2021 for example. This represented an increase of 3% vs 2019.
In terms of R&D funding from abroad, there was a massive drop of around (-41%) due to the fact that Switzerland was cut from the Horizon Europe programme. This short fall gap was filled by the Swiss Government.
Where does R&D funding in Switzerland come from and where is it invested?
As stated, Switzerland is one of the largest R&D investors in the world and two-thirds of all research and development in Switzerland is funded through the private sector. The total amount invested for R&D equates to 3.15% of Swiss GDP. This makes it tone of the highest investors in R&D in the world. So where is the money invested?
- The leading universities federal institutes of technology – ETH Zurich and EPFL – focus primarily on basic research.
- The EPFL is home to over 500 laboratories and research groups, each working at the forefront of science and technology.
- Research conducted at the ETH in Zurich takes place in the 16 departments as well at its Competence Centres.
- The universities of applied sciences and private sector, however, do concentrate on applied research and responding to business needs.
- The private sector is a major contributor to R&D in Switzerland, investing a total of CHF 15.5 billion (2.1% of GDP) in 2019.
- Three-quarters of this funding went to R&D-intensive sectors:
- the pharmaceuticals and chemical industry (36.7%),
- metals industry (13.7%),
- research laboratories (13%)
- and new technologies (11.3%).
Life Sciences Example
Switzerland is consistently ranked as the world’s most innovative countries by the United Nations Global Innovation Index, Switzerland has been a world leader in life sciences for a significant period of time.
With many of the biggest names in Pharma and many leading start-up companies present in Switzerland, it should come as no surprise that from 2019 -20, capital investments in Swiss biotech companies nearly tripled, to US$3.7bn. In fact, R&D spending increased during this period by 10%.
In 2021, research-based Swiss biotech companies created 8% additional jobs within that year and employed a total of 16’300 people. A well organised and resilient eco-system in this, and other industry sectors, stable political and economic conditions, and a well educated work force, help make Switzerland the ideal incubator for biotech, life sciences and Pharma companies. In Switzerland both Swiss and international start-ups are also thriving, and particularly US businesses looking to accelerate their growth in Europe find Switzerland attractive.
The productivity of the Swiss Pharma and biotech sectors is seven times higher than that of the global economy. Switzerland’s appeal as a life sciences hotspot is increasing.
Swiss company Tax and R&D support
Also worth mentioning, is the subject of corporate tax. Up until now each canton in Switzerland has been able to offer investors their own minimum rates. An initiative-ruling by the OECD and other jurisdictions now means that around 137 countries including Switzerland will implement a minimum taxation rate of 15% in 2023. This will be implemented in Switzerland by means of a constitutional amendment. However, the initiative must first be put to a popular vote on the 18th of June 2023. If approved, the Federal Council can implement the minimum 15% taxation rate for Switzerland with an ordinance.
Some cantons are already discussing incentives to encourage companies to still invest in Switzerland. This may include support funds for R&D for those choosing Switzerland as a future investment hub.
Switzerland has an inviable record globally as being a politically – and economically stable country, with a positive investment support mechanism including attractive tax options. An OECD driven global minimum tax ruling is set to change the tax advantage scenario, but cantons and businesses in Switzerland are positive that they can still attract potential investors with other incentives and sweeteners, including potentially, R&D support.
Accurity is SECO licensed with a 20+ year enviable reputation as a trustworthy, reliable and transparent partner for companies of all sizes including SMEs, contractors and recruitment agents. We also work with companies looking to invest in Switzerland – with their staffing payroll requirements – as well as workers already living in Switzerland and working remotely for foreign companies. Our core services include Employer of Record or EOR for contractors and international and domestic clients wishing to engage contractors. Our pricing system is fair and transparent. We are based in Switzerland and have excellent local knowledge and connections. Contact our team to see how we can help you.
