The Swiss financial sector: driving jobs and growth – especially in a crisis

Financial sector growing

BAK Economics expects banks’ value added to grow this year and next, thanks primarily to the asset management business. The negative impact of credit defaults is also likely to be limited, thanks to stable loan portfolios and companies’ return to strength. For insurers, the forecast is that higher premium income and a lower overall cost of claims than in 2020 will have a positive influence on value added. BAK Economics predicts 1.8% growth in gross value added for the financial sector in the current year, and a comparable figure for 2022. However, it expects value added in the financial sector to rise less sharply than the average for the economy as a whole, because the catch-up effects are likely to come mainly from other sectors.

One franc in ten of value added is created directly in the financial sector

The environment remains challenging on account of the COVID-19 pandemic. The financial sector is one of the mainstays of the Swiss economy: in all, gross value added of CHF 95.5 billion was attributable to the sector in 2020, corresponding to 13.9% or one seventh of domestic economic output. Banks and insurers directly generate value added of CHF 66.5 billion, meaning that the financial sector is directly responsible for 10% of Swiss economic output. By sourcing advance services from companies along the upstream value chain and through consumer spending by employees in trading and commerce, the activities of the financial sector also generate indirect effects of CHF 29 billion in other sectors. Banks contribute rather more (CHF 58.6 billion) to the financial sector’s total gross value added than insurers (CHF 36.9 billion). In terms of employment, more than 224,000 jobs are directly attributable to the financial sector, or one in 20 of the overall total. If indirect effects are added in, some 430,600 or 10.2% of all jobs in Switzerland are directly or indirectly dependent on the financial sector.

An important taxpayer

The financial sector’s business activities are a key generator of Switzerland’s tax revenues. The taxes levied by the Confederation, cantons and communes that were directly or indirectly linked to the financial sector were estimated at CHF 17.1 billion in 2020 – 11.7% of the total tax take. Some CHF 9.7 billion of that figure were attributable to taxes on corporate earnings and earned income. Some CHF 7.4 billion were also collected by the federal government in the form of taxes on financial sector transactions (e.g. stamp duty, withholding taxes).

Finance proves its worth in times of crisis

Supplying the real economy with money is one of the banks’ core functions. They have done so to great effect in the coronavirus crisis, via the COVID-19 loan programme implemented in collaboration with the federal government. The loans were issued by the commercial banks and, depending on their size, are either wholly or partially guaranteed by the federal government. One in four companies in Switzerland took out a loan of this kind. Financial intermediaries also perform other functions that are indispensable in a modern economy, such as processing payment transactions, capital accumulation and providing insurance services. A competitive, resilient and prosperous financial centre is therefore in the interests of the entire Swiss economy.