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The Swiss financial centre

Switzerland is one of the leading and most competitive financial centres in the world.

Two Swiss cities, Zurich and Geneva, currently rank second and sixth in European comparison (Source: The Global Financial Centres Index (GFCI), September 2019). The financial sector, which consists of the banking sector and the insurance sector, makes a significant contribution to Switzerland’s prosperity.

Economic output

9.4 % of gross value creation are directly and 12.4 % indirectly attributable to the financial sector.

Employment

The banks provide 144,000 jobs and employ about 100,000 people in other sectors.

Taxes

The amount of taxes paid by the Swiss financial sector is almost equivalent to what the federal government spends on education & research, security, food & agriculture.

An important pillar of the economy

In 2018, the financial sector reported gross value creation of around CHF 63 billion. This corresponds to a share of 9.4 percent of Switzerland’s total economic output. Around every tenth franc of value added in Switzerland is therefore generated by the financial sector. The banks account for over half of this amount (CHF 32.8 bn).

The financial sector is Switzerland’s third-largest sector and therefore an important pillar of the Swiss economy. It generates higher value added than the pharmaceutical industry and the retail industry combined.

Chart 1
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Total effect of financial centre | 12.4 % | 83 bn
Direct effect of banking sector | 4.9 % | 32.8 bn

The importance of the financial sector is also reflected in its large number of employees. In 2018, the financial sector accounted for around 218,000 full-time jobs. Around 5.3 percent of all employees in Switzerland therefore work in the financial sector, two thirds thereof, or 144,000, are employed at the banks.

Chart 2
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Total effect of financial centre | 8.8 % | 364,900
Direct effect of banking sector | 3.5 % | 144,000

The financial sector also makes a significant contribution to Switzerland’s tax revenues. In 2018, CHF 17.6 billion in taxes were paid to the tax authorities. This corresponds to 12 percent of the total tax revenues of the federal government, the cantons and the municipalities.

Chart 3
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Total effect of financial centre including financial market-related taxes
(value-added tax, withholding tax and stamp duty) | ~ 12 % | 17.6 bn

Substantial indirect contribution

With the rise in economic interlinkages, the business activities of a company in one sector are increasingly benefiting enterprises in other sectors. The demand for advance services is creating positive momentum for companies in other sectors along the entire value chain. Employees’ consumer spending benefits trade and industry. As a result, the business activities of companies in the financial sector also create value added in other sectors.

The demand for advance services by companies in the financial sector and the consumer spending of their employees result in job creation in other sectors. A total of almost 365,000 full-time jobs are directly or indirectly linked to the financial sector.

The importance of the financial sector and the financial market when it comes to tax revenues is attributable on the one hand to the fact that the revenues and profits associated with value-added-effects are subject to direct taxation by the federal government, the cantons and the municipalities. On the other hand, the federal government levies indirect taxes on financial market transactions and payment for financial services (value-added tax, withholding tax and stamp duty).

Outlook

Due to the subdued developments in the banking industry, growth in the financial sector remains below the macroeconomic average. The cost savings programmes planned by the big banks are expected to result in a decline in value added in 2019, followed by a slight recovery in 2020. Other financial services are benefiting from the structural change in the financial sector and should see solid growth.

As a result of the high pressure on costs and structural change, which is reflected, for example, in branch closures, overall employment growth is not expected. For 2019 and 2020, the slight decline in employment levels at banks is expected to continue. However, the substantial outsourcing seen in recent years is likely to now be largely completed. The strong employment growth in other financial services segments in recent years (due in part to job outsourcing by banks) is expected to pause in 2019 before picking up speed again.

Considering the persistently challenging business environment, the financial sector is likely to remain below the macroeconomic average in terms of both value added and employment growth. Considering the fact that major restructuring projects have been completed, the banks’ real gross value added is likely to once again be low, with a continued slight decline in the number of employees. Other financial services are expected to continue to benefit from structural change and outsourcing and, as a result, develop more dynamically.

© SwissBanking 2020

Swiss Bankers Association
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