Swiss watch industry calls for authorities’ aid

The Swiss watch industry has been hit by a slump in its exports to China. On Tuesday, the industry called for state support measures, especially from the country’s central bank, asking its intervention to offset the Swiss franc’s strength on currency markets, which is undermining the industry’s competitiveness.

The Swiss watchmaking sector experienced three years of spectacular growth between 2021 and 2023, but is now facing plummeting demand in China, one of its key markets. In H1 2024, Swiss watches exports to China fell by 21.6%.

In a joint statement, the Swiss watchmaking industry association and the federation of Swiss watchmaking have called for “concrete measures from the authorities” to support the sector, which employs some “65,000 people” in the country, according to the statement.

“The Swiss watch industry is currently at a difficult juncture,” the two bodies said in the statement, underlining that a number of watchmaking companies have had to resort to short-term furloughs, to extend the factories’ summer closure period, and even lay off workers.

The Swiss organisations noted that the slowdown in demand and the exports slump have hit especially hard the industry’s supply chain and entry-level and mid-range watch brands, while the “Swiss franc’s continuing strength” adds an additional complication as it weakens their competitiveness.

They also argued that, since inflation in Switzerland is “well below” the 2% target, “the Swiss National Bank has room for manoeuvre to intervene on the foreign exchange market.”

The two organisations are also advocating for a “reduction of administrative burdens” and for measures to improve the “regulatory framework” with regards to exports, notably via free-trade agreements that would open up new markets.

Swiss watches exports reached an all-time high in 2023 at CHF26.7 billion (€28.4 billion at current exchange rates) thanks to very strong demand in the three years following the pandemic.

Demand was bolstered in particular by so-called “revenge” purchases, as some consumers tapped the savings made during lockdowns to buy more luxury goods, including Swiss watches.

In China, too, demand picked up after the zero-Covid policy was abandoned, but the scale of the recovery soon revealed itself to be disappointing, as internal demand was hit by slowing economic growth, housing market shocks and youth unemployment.

On Thursday, the Swiss watchmaking federation will publish the August export statistics. In July, watches exports fell by 1.6% year-on-year, with a 32.8% drop in exports towards China.

Zurich, September 17 2024 (AFP)