BAKBASEL study shows that a more competitive financial centre is important for Switzerland’s economy and SMEs

Basel/Zurich, March 17, 2011 The Swiss financial sector contributes directly and indirectly an annual added value of CHF 88 billion to the Swiss economy and employs 529,000 people. A BAKBASEL study proves for the first time with specific figures that the Swiss financial centre is of enormous importance for the country’s entire economy.

On behalf of the Swiss Bankers Association and economiesuisse, an umbrella organization representing the Swiss economy, BAKBASEL investigated the relationship between the financial centre and business in Switzerland and calculated the value of the financial services industry for the entire economy. The study shows that looking only at demand (such as services) is not enough, as the supply side (such as lending) is at least as equally as important for the entire economy.

The four key findings of the study:

  • One-third of the growth in the Swiss economy between 1990 and 2009 is attributable to the financial sector. This sector expanded at an average annual real growth rate of 3.5% over the past 20 years – despite two financial crises during this period – making it the Swiss economy’s most important growth driver.
  • The actual importance of the financial sector was calculated using an input-output model. The calculation shows that the financial sector’s economic activity contributes an overall added value of CHF 88 billion (with 60 billion of that coming directly from the sector). This is about one-fifth of the overall added value created by the Swiss economy. In addition, the sector creates 12% of all jobs in Switzerland, with 529,000 people employed, 44% of them directly in the financial sector. The Swiss federal government, as well as the cantons and municipalities, benefit from the financial sector in the form of high tax revenues. Over the last ten years the estimated annual tax revenue has been on average CHF 14.4 billion, including financial market taxes. This figure is about 14% of the total tax revenue in Switzerland.
  • Empirical studies show that an ample supply of credit has a long-term impact on economic development. According to the European Central Bank (ECB), a 5% reduction in credit growth leads to a 1.6% decrease in GDP growth over the long term. In contrast to other countries over the past few years, Switzerland has had a sufficient supply of credit. Moreover, companies benefit from comparatively low interest costs. These favourable financing costs are not only due to the low interest rates set by the Swiss National Bank. An international comparison shows that the interest rate margin at Swiss banks is lower than it is in other countries. Switzerland’s many small and medium-sized enterprises benefit in particular from the comparatively inexpensive bank credit and the streamlined system for payments. Multinational companies benefit from specialised services and the wide-ranging expertise of Swiss banks.
  • In addition to these direct and indirect economic effects, the study shows other positive effects that the financial sector has on the entire economy. This positive impact includes, for example, high-quality training and education as well as numerous cooperative research efforts.

The Swiss Bankers Association and economiesuisse are aware that the financial centre‘s major importance also brings with it significant responsibility. Finance and business are dependent on each other, and both need optimal conditions in which to operate.