Canton Geneva is feeling pain of strong franc

Dark clouds are on the horizon for Geneva businesses, says Maudet, as a result of the strong franc Keystone

Geneva is suffering from the effects of the surge in the Swiss franc, warns the head of the canton's economics department. Pressures on margins are being felt in all sectors from banking to tourism.

“Pressure is increasing on the margins of multinationals and other firms active abroad whose turnover is mainly in euros or in foreign currencies, while their costs are in Swiss francs,” Pierre Maudet, Geneva’s head of the department of security and economic affairs, told the Swiss News Agency in an interview on Thursday.

On January 15 the Swiss National Bank (SNB) abruptly abandoned a CHF1.20 per euro cap, sending the currency soaring and raising concerns for Swiss-based businesses, many of whom depend on exports. On Thursday the exchange rate stood at CHF1.04 to the euro.

The bank’s decision has badly affected the retail, hotel, restaurant and tourism sectors, said Maudet. Fewer tourists and conference participants are also expected from European countries.

To cope with the strong franc firms have tried to adapt by increasing working hours, introducing part-time employment, optimising production processes and moving certain activities abroad.

Maudet said he had been in contact with firms which were studying all these different options, without giving any names. At the same time he said new firms were continuing to establish themselves in Geneva, such as the US biotech firms Linkage Biosciences and Incyte which moved there this month.

While the Geneva-based watch industry, which catered mainly to a wealthy clientele, appeared to be coping, costs for banks and commodities traders were increasing and negative interest rates were also having an impact on margins, he added.

In February the Julius Baer Group said it planned to cut costs by CHF100 million due to the strong franc. It was reported this week that the Swiss arm of global bank HSBC is likely to cut around 260 jobs in Geneva over the next two years.

On Thursday, Bloomberg reported that trading firm BNP Paribas was cutting commodity- and energy-finance staff in Geneva as the French bank scales back the unit’s activities. Since the end of February, BNP Paribas cut at least 20 jobs in the Swiss city, the hub for much of the world’s commodity trading.

The side effects of the surge in the franc, which has prompted profit warnings and job cuts at Swiss banks and manufacturers, is also putting strains on budgets at Geneva’s numerous UN agencies, and international and non-governmental organisations.