“France Attractiveness: Leading in Foreign Investment Despite Challenging Times”

2023-05-10 20:00:00

The attractiveness of France seems to be resisting headwinds. Despite the long years of the pandemic and the war in Ukraine, the French economy did well in 2022. Repeated confinements and the shock of the price conflict did not deter foreign companies from coming to invest in the sector. ‘Hexagon.

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According to the latest EY barometer unveiled on Wednesday May 10, France is in the lead in Europe with 1,259 projects identified in 2022. “Despite this sluggish and difficult European context, France maintains its first place”, confirm to the Tribune Marc Lhermitte, consultant at the audit firm. The number of projects even increased by 3% compared to 2021 (1,222) and is at a peak over the last decade.

France is in the lead, Germany and the United Kingdom in decline

France retains this first place for the fourth consecutive year. “France in a complex global system is doing better than the others” faced with the inflation and energy crises, underlines Laurent Saint-Martin, managing director of Business France, the agency in charge of France’s image abroad and former La République en Marche deputy during of Macron’s first five-year term.

Because in Europe, the situation is darker. Investment projects stagnated across the Old Continent between 2021 and 2022 (+1%). Above all, they are far from having returned to their pre-health crisis level. The deterioration of the economic outlook by the International Monetary Fund (IMF) and several economic institutes lately does not suggest any improvement in the decisions to invest by foreign companies.

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Some of France’s European neighbors are, in fact, losing ground. This is for example the case of the United Kingdom (-6% between 2021 and 2022) which identified 929 projects last year. Brexit continues to weigh on corporate strategies, not to mention the political crisis that shook the country in the fall of 2022 following the hasty resignation of former Prime Minister Liz Truss. The UK is paying for the consequences of Brexit, the effect of which on exporting industries is undeniable, the firm says.

In Germany, the number of projects is also down (-1%) between 2021 and 2022 (832). “Germany is not really interested in foreign investment with full employment and production chains very organized in industry “, says Marc Lhermitte. AT this is in addition to the strong dependence of the German economy on Russian gas and oil which has increased energy costs in 2022.

In Spain, investment projects are also down (-10%). On the other hand, Italy is doing well with a spectacular increase of 17%.

The number of jobs per project continues to fall

Despite these favorable results for France, some figures darken this picture. The number of jobs overall fell by 15% between 2021 and 2022, from 44,751 to 38,102. This is a level that remains higher than that of the 2010-2016 period, but it is a significant drop from one year to the next. “We can be pleased with the number of projects in France. On the other hand, these are small projects and especially extensions. It is a significant problem. There are 33 jobs generated in France on average compared to 58 in Germany”, explains Marc Lhermitte. “How does Germany manage to fix more important projects? It has a competitive advantage in collective labor law and time of procedures », adds the expert. Among the other great powers of the Old Continent, Italy (148) and Spain (326) are well ahead of France.

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Leaders worried regarding the next three years

Asked regarding the three-year outlook, leaders are increasingly worried. After reaching a peak of optimism in 2021 (74%), the share of managers believing that attractiveness will improve in the next three years continues to fall to 53% in 2022. “It’s a significant drop in confidence at three years. This restores the complicated context in Europe and France”, says Marc Lhermitte. The auditors mention the rise in the cost of energy and raw materials, the fall in consumption and the rise in interest rates weighing on the morale of the bosses.

Added to this are the social movements linked to the pension reform. The survey of leaders took place from February 15 to March 15 in full dispute. “Political and social tensions may have led international leaders to question the government’s ability to pursue reforms to improve competitiveness, reduce the debt and the trade deficit, support “made in France” investment” , emphasizes the audit firm. In an attempt to turn the page on the stormy pension reform, Emmanuel Macron must begin a sequence devoted to reindustrialization. Between the big reception organized at the Élysée on Thursday and the Choose France summit next Monday, the Head of State wants to restore France’s image abroad.

Social climate, political deadlock: weakened French attractiveness