The deal was consummated last week, when shareholders of Swiss bank UBS reluctantly agreed to take over Credit Suisse to avoid bankruptcy of the country’s second-largest bank. This is a blow for Switzerland which, in addition to losing a 187-year-old institution, is losing a bit of face.
Finance is one of the specialties of Switzerland. The spiraling fall of Credit Suisse, which met and even exceeded the financial strength ratios imposed by the regulatory authorities, is proof that nothing can be taken for granted.
Banks are a Swiss national jewel, just like watches and chocolate. Swiss watches are known and coveted all over the world. They are the third export product of the country, behind the pharmaceutical sector and that of machine tools. More than 100,000 jobs are linked to it.
Unlike Credit Suisse, whose disappearance no one had foreseen, the future of this other institution has long raised concerns in the country.
It is above all thanks to Swatch and its plastic watches that the timepiece sector, as we say in Switzerland, has experienced its latest renaissance. That was 40 years ago. Even today, the Swatch group dominates Swiss industry. The company, which also has brands like Omega and Longines in its range, is the second largest watch exporter in the country, behind Rolex.
Swatch expects record sales this year thanks to a new star product, the Swatch Omega, but this success hides the steady decline in the number of watches sold by the group. Swatch, which once sold 20 million watches in its prime years, now only sells between 3 and 7 million, according to industry estimates.
No one still needs a watch to tell the time. However, the Swiss luxury brands, such as Rolex, Longines or Patek Philippe, are still popular with the richest on the planet. Their products have become collector’s items.
Today, Switzerland produces less than 2% of the watches manufactured in the world, but accounts for 50% of total sales in value. This year, watch sales are expected to break a record, despite inflation and a deteriorating economy. Luxury seems to be still sheltered from the weather.
With connected watches, which have long since supplanted the mechanical watches which are the Swiss specialty, another end of the world is apprehended for the Swiss flagship. Apple, which started making watches in 2015, now produces more than all Swiss companies combined.
Switzerland has also taken up smartwatches, with the ambition to combine the beauty and quality of Swiss manufacturing with certain features of Apple Watches and others. The bet is not won, to say the least.
Will Swiss watches survive the 21st century? This is the question that the industry (re)asks itself now.
