Zurich is and remains Switzerland's most important financial center, a new study confirms. This has not least to do with the wealth and quality of financial professionals available. But there are uncertain times ahead.
With the big bank UBS and the traditional Zurich private banking house Julius Baer, two players in the financial center have already presented a strong set of annual results. The latest figures show that the Corona crisis has boosted business, at least in banking.
This in turn benefits the potential of the entire financial market. With a gross value added of 31.2 billion Swiss francs ($34.8 billion) in 2019, as well as some 92,000 full-time jobs, the Zurich financial center (which also includes the financial service providers of the cantons of Schwyz and Zug) is still by far the largest financial center in Switzerland. This was the finding of a study published Tuesday by the Swiss economic research institute BAK Economics for the government of the canton of Zurich.
Faster Than London and Luxembourg
Financial companies based in the region of Zurich generated about 44 percent of the value-added of the entire Swiss financial sector in 2019 and provided 41 percent of jobs. Both the region's value-added and employment figures thus exceeded those of the next largest financial centers in Geneva including Vaud, both Basel and Ticino combined.
The Zurich financial center is a colossus in a geographically very small area, which recently even managed to outperform its closest European rivals London, Luxembourg, and Frankfurt in terms of value-added development. In the region itself, the value-added is greater than that of any other single industry, not least that of ICT companies and the public sector, according to the survey.
Fear of More Rules
Surprisingly, however, it is not primarily international-sounding names such as UBS, Credit Suisse, Zurich, and Swiss Re that are the attraction – it is rather the financial professionals themselves. As the study found in a survey of local industry experts, the availability of specialists is perceived as an outstanding location factor. Political stability and infrastructure got mentioned as further assets. The respondents named regulation and the interest rate environment as the most significant threats.
But for the experts from banking, insurance, asset management, and service providers, clouds are looming large on the horizon. Despite the glittering set of annual reports presented by UBS and other banks, the Zurich government assumes that the Corona crisis did hit the local financial sector as a whole.
Corona Repercussions
Due to companies' reluctance to invest, lower demand for credit (with the exception of Covid-19 bridging loans), and value adjustments to assets under management, banks are expected to see a 1.5 percent drop in value-added in 2020, it said. Meanwhile, the Corona crisis has led to increased claims payments for property and casualty insurers and reinsurers, most of which are based in the Zurich region. The result was a 0.9 percent decline in value-added.
The trend will also be reflected in the job market, according to the study. Even before the Corona crisis, some banks announced cost-cutting programs. In addition, the branch network is likely to be thinned out further in the course of structural change, as was recently seen at big banks UBS and CS.
As a result, the study expects employment in banking to decline by 0.2 percent in 2020 and 2021, and by as much as 1.2 percent this year. In the insurance industry, jobs could shrink by 0.6 percent and 0.8 percent, the authors warn.
