Swiss Industry Group Doubts Watch Market Near-Term Recovery

When will the watch market hit bottom? A lot hinges on the answer to this question.

A componenet from a Zenith El Primero movement.

Maintaining cash flow in a down market is never easy. For brands that went into the slump with waiting lists, this is less of a challenge. But for those brands still working hard for every sale, the watch market downturn could easily represet an existential crisis. For example, Purnell Watches, makers of extremely dynamic timepieces featuring two triple-axis tourbillons, was dissolved on December 18 of last year. And, we certainly don't know the particulars, but Rolex shuttered Carl Bucherer very recently (according to many reports).

Regrettably, a Swiss industry group, the Union Patronale Suisse (Swiss Employer's Union), seems to believe that the downturn has quite a few months left. More specifically, Marco Taddei (the group's International Affairs Section Manager) recently penned an article suggesting that one of Switzerland's more important social safety nets, the Réductions de L'horaire de Travail (Reduction in Work Hours, or RHT) needs strengthening due to struggles in the watch industry.

In brief, the RHT allows employers to shorten employee work hours while the Swiss government pays the difference between full-time pay and their pay under reduced work hours.

A vintage watchmaker's tool from the JLC "Reverso Stories" exhibit.

This is a program which allows businesses in Switzerland, including watch brands, to temporarily reduce their labor costs when under financial strain without resorting to the more drastic step of firing employees. Fundamentally, RHT allows Swiss businesses to engage in a practice economists refer to as "labor hoarding." In practice, businesses often maintain employee headcount at a more stable level than one might expect if current labor costs were the main driver of staffing choices. The reason for this has to do with hiring and firing costs. The simple act of changing employee headcount is costly. On the hiring side, you have to screen and train new employees. On the firing side, there can be morale costs as well as potential lawsuits and the like. For this reason, businesses are generally hesitant to fire employees.

Let's return to Taddei's article. In it, he expresses concern that watch industry workers placed on RHT at the beginning of the downturn may soon run out of their benefit. His concern is reasonable. According to Swiss government statistics, the watch industry saw a steady and very significant increase in the rolls of reduced-hour workers in 2024. The year started with 117 people on reduced hours. By the start of summer, in June, that number had more than quadrupled to 485, a very significant increase. It then more than doubled to roughly 1,000 workers in August. By November, 83 workers had left reduced hours, but eleven months of data for 2024 indicates a more-than-sevenfold increase in reduced-hour watch industry workers. Swiss brands were clearly scaling back their production, marketing and related activities throughout 2024.

Official government data on the monthly number of watch industry employees on RHT through much of 2024.

RHT support typically only lasts a year, which raises the spectre that more than 900 workers could lose their income support by the fall of 2025. The real risk is that these workers are watchmakers. If they elect to switch industries entirely because their RHT has run out, their skills may be unavailable during the industry's future recovery. This seems to be the main reason that Taddei published his article suggesting that the RHT benefit should be extended to eighteen months. And, it seems Taddei does not believe the watch industry will return to more normal work hours in 2025.

There are other reasons why Taddei's argument about extension of RHT may be increasingly salient. Also in February, local media in the Vallée de Joux reported that Swatch Group has decided to close one of their Breguet manufacturing locations in Crêt-du-Locle and relocate employees there to a Blancpain manufacturing site in Delémont. Apparently most of the relocated Breguet work involves manufacturing of cases and bracelets.

A Breguet Tradition Seconde Retrograde.

Swatch Group claims none of the 150 Breguet employees in Crêt-du-Locle will lose employment. But a relocation like this can be very disruptive to commuting patterns. By car, we're talking about a roughly one hour distance between the two locations. I would not at all be surprised if a lot of Breguet workers quit rather than accept this new commute, an effect which very well could have been anticipated and possibly desired by Swatch Group.

RHT exists precisely in order to avoid this kind of downsizing so that watchmaking skills are not lost to presumably short-run downturns. But if more brands decide to cut rent and other property costs through consolidation, RHT will be ineffective in forestalling "voluntary quits" by those who can not accept a geographic change to their place of work. Let's just hope that the watch industry turnaround is sooner, rather than later, so that watch industry employment can begin to stabilize.

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