Why the Real Signal for SMEs Lies in Inflation

The strong franc is not just a matter for the trading floor. For a Swiss SME that invoices in euros, for an employer recruiting near the border, or for a cross-border household comparing rents, the EUR/CHF exchange rate has a very tangible impact on decision-making. But the figure displayed by the banks tells only part of the story: once inflation is factored in, the impact seems less dramatic, though by no means insignificant.

On 6 July 2026, one euro was worth 0.9201 Swiss francs according to the reference rate published by the European Central Bank, whereas the annual average stood at around 1.56 francs to the euro in 2000, according to data cited by ECO Savoie Mont Blanc. In nominal terms, the euro has therefore lost just over 40 per cent against the franc in nearly a quarter of a century. When adjusted for the difference in inflation between Switzerland and the eurozone, the decline is more in the range of 10 per cent to 15 per cent, with a figure of around 11 per cent cited for the period between 2000 and early July 2026. For businesses, this nuance changes the way margins, prices and wages are interpreted.

The nominal rate affects the accounts; the real rate informs decisions

The nominal exchange rate is the immediate price of one currency expressed in terms of another. It is what a business sees when it converts an invoice received in euros, or what a cross-border worker sees when converting their salary in francs into expenditure in euros. It is simple, visible and sometimes stark.

The real exchange rate adds a crucial layer: changes in prices on both sides of the border. If prices are rising faster in the eurozone than in Switzerland, part of the euro’s nominal depreciation reflects this difference in inflation, and not merely a strengthening of the franc on the foreign exchange market. This is why a comparison between 2000 and 2026 cannot be limited to stating that the euro has lost more than 40 per cent and automatically inferring an equivalent gain in purchasing power in francs.

The inflation gap remains at the heart of the matter. In June 2026, annual inflation in Switzerland stood at +0.5 per cent according to the Federal Statistical Office, whilst Eurostat estimated that of the eurozone at +2.8 per cent, following +3.2 per cent in May, according to data cited by ECO Savoie Mont Blanc. For a Swiss SME, this relative stability in domestic prices can support internal competitiveness, but it does not eliminate the conversion issue when foreign turnover is converted back into francs.

In company dashboards, a distinction must therefore be made between two uses. Nominal figures are used to manage cash flow, receipts, supplier payments and accounting exchange rate differences. Real terms help to understand competitiveness over the long term: wages, production costs, selling prices and changes in customers’ purchasing power. Both perspectives are useful; confusing them can lead to overestimating an advantage or underestimating pressure on margins.

Cross-border workers: a visible advantage, but not increased purchasing power

In border regions, salary conversion is the key indicator. ECO Savoie Mont Blanc takes the example of a monthly salary of CHF 6,000. At an exchange rate of 1 euro to 1.56 CHF, this amounted to approximately 3,850 euros. At an exchange rate of 0.9201 CHF to the euro, it amounts to around 6,520 euros. The gross conversion thus shows a gain of around 70 per cent.

However, this figure is misleading if interpreted as a pure gain in purchasing power. In the meantime, prices have risen in France and across the eurozone. Housing costs, levies, personal taxation, social security contributions, consumption habits and the actual proportion of expenditure made in euros significantly alter the result. When considering a constant real Swiss salary, the inflation-adjusted exchange rate advantage is estimated by ECO Savoie Mont Blanc to be between 10 per cent and 15 per cent.

For Swiss employers, this is not a theoretical issue. In the first quarter of 2026, Switzerland had 241,089 cross-border workers residing in France, up 3.5 per cent year-on-year, according to the Federal Statistical Office, as cited by ECO Savoie Mont Blanc. France remained the leading country of residence for cross-border workers employed in Switzerland, ahead of Italy and Germany. In areas close to Geneva or Lake Geneva, exchange rate fluctuations make a salary paid in francs more attractive to workers living on a euro-based income.

This appeal can facilitate certain recruitment drives on the Swiss side, particularly when the necessary skills are available in the cross-border region. It can also create tensions: higher salary expectations, increased competition between employers, and sensitive discussions within teams when employees do not face the same cost of living. For HR and senior management, the issue is therefore not limited to nominal pay. It touches on internal equity, staff retention and pay communication.

The cross-border property market quickly absorbs the impact of the strong franc

The property market illustrates the pitfall of making raw comparisons even more clearly. A French property listed at 300,000 euros used to cost around 468,000 CHF at an exchange rate of 1.56 CHF to the euro. At an exchange rate of 0.9201, it works out at around 276,000 CHF. Viewed from a Swiss franc account, the price therefore appears to be around 41 per cent lower.

But here again, the analysis must take into account inflation and the specific trends in local markets. A property worth 300,000 euros in 2026 is not equivalent to a property worth 300,000 euros in 2000. ECO Savoie Mont Blanc points out that if a French property had simply kept pace with European inflation, without any specific real-terms increase, it would today cost around 11 per cent less in real Swiss francs than in 2000. Conversely, a 10 per cent real increase almost cancels out the exchange rate advantage; with a 30 per cent increase, the property becomes more expensive in real Swiss francs than in 2000; with a 50 per cent increase, the gap becomes significantly unfavourable despite the strong franc.

For a Swiss SME, the link to the property market may seem indirect. It is not. Housing determines the availability of labour, commuting times, wage pressure and where employees choose to live. In areas with tight housing markets, the strong franc can boost the solvency of households earning their income in Switzerland and underpin demand for property. This can make access to housing more expensive for other households and complicate local recruitment, including for administrative, logistical or service roles.

Managers setting up a new site, relocating a team or recruiting near a border would therefore be well advised to factor in housing costs in their analysis. A salary that looks competitive on paper may lose its appeal if rents, property prices or mobility constraints offset the exchange rate advantage.

For SMEs, the strong franc acts both as a supplier discount and a margin squeeze

The impact of the EUR/CHF exchange rate depends first and foremost on the company’s economic structure. A Swiss SME that sells into the eurozone but pays the bulk of its expenses in francs is affected by the franc’s appreciation: each euro received is worth less once converted. According to PME Magazine, a company that enters into a contract in euros may see its margin squeezed if the franc appreciates between the time the contract is signed and payment is made. The problem is particularly acute when prices are fixed in advance whilst costs remain in francs.

Sectors exposed to price competition are the most vulnerable: manufacturing, subcontracting, machinery, components, tourism and the hospitality industry, as highlighted by ECO Savoie Mont Blanc. Raising prices is not always possible. Absorbing the difference reduces the margin. Waiting for the exchange rate to correct itself amounts to taking a financial gamble, sometimes without having explicitly decided to do so.

Conversely, SMEs that import goods, parts, machinery, materials or services from the eurozone benefit from a strong franc. Purchases in euros cost less in francs, which can help maintain profit margins or limit price rises in Switzerland. This is the other side of the same coin: exchange rates can weaken an exporter and help an importer, sometimes within the same company.

The difficulty lies in volatility. Raiffeisen Switzerland notes that uncertainty exacerbates exchange rate fluctuations and complicates financial planning for SMEs. Switzerland Global Enterprise, citing a survey mentioned by swissinfo.ch of 700 Swiss exporting SMEs, indicates that exchange rate risks are among their main concerns, ranking even ahead of US customs duties. This is a significant sign: for many small and medium-sized enterprises, exchange rates are no longer a secondary consideration, but a central element of their budget.

Not all SMEs have the same resources as large corporations to protect themselves. Allnews points out that small and medium-sized enterprises often incur higher costs for international payments and foreign exchange transactions, due to their more limited bargaining power. Currency hedging can be useful, but it comes at a cost, requires an understanding of the instruments used, and must remain consistent with the company’s actual cash flows. It is no substitute for a commercial strategy or a market-by-market margin analysis.

In practice, an SME can start by mapping out its cash flows: turnover by currency, purchases by currency, payment terms, contractual clauses, cost prices and margin thresholds. It can then consider simple measures: aligning costs and revenues in the same currency as far as possible, reviewing payment terms, introducing adjustment clauses where the commercial balance of power allows, comparing foreign exchange fees, or discussing hedging solutions with its bank and accountancy firm. These approaches must be tailored on a case-by-case basis, particularly with regard to accounting, cash flow and risk profile.

The SNB does not eliminate uncertainty for businesses

The Swiss franc is still regarded as a safe-haven currency, which can exacerbate its appreciation during periods of economic or geopolitical uncertainty. The Swiss National Bank monitors the currency’s performance and may intervene on an ad hoc basis to mitigate excessive fluctuations. However, since the abandonment of the floor rate of 1.20 CHF to 1 EUR in January 2015, it no longer sets a specific threshold, according to the research report.

For business leaders, this means it would be unwise to base a budget on the assumption of a guaranteed exchange rate. The exchange rate can influence sales, purchasing, wages, investment and even the choice of location. But it must be analysed in conjunction with inflation, market prices and the specific structure of cash flows. A strong franc can sometimes provide breathing space, whilst at other times it tightens the noose. The difference lies less in the daily exchange rate and more in the company’s ability to identify where the exchange rate fits into its business model.