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France: a spectacular improvement in attractiveness

France’s image as perceived by investors has never been so positive according to auditing firm EY’s annual attractiveness barometer. A spectacular rise that has previously been highlighted by Business France in its “Internationalisation of the French Economy” report, published in April 2018.

The perception of France has never been so positive in the last ten years according to EY’s annual attractiveness barometer, published on the 11th of June. This is evidenced by 81% of the 208 leaders interviewed who said they were satisfied or very satisfied of France. This optimism seems sustained as more than half of those asked predict that France’s attractiveness will improve further in the next three years. The French score is far higher than that of its European neighbours with Germany at 45% and the United Kingdom on 30%.

This improvement in France’s image, already noted in Business France’s “Internationalization of the French Economy” (see https://bit.ly/2kRLLhH). In fact, Business France’s economists were already noting in April that foreign investments had reached a ten-year high in 2017.

“Multiple factors contribute to the noted improvement in France’s image”  explains Christophe Lecourtier, director general of Business France, quoted in EY’s barometer. “Though we are hearing some protectionist rhetoric, the expression of France’s openness to the world has been very well received by foreign investors. The desire to a profound reforming of our economy is also noted as a positive.”


France closes the gap

According the EY’s barometer numbers, foreign investment projects [Note 1] in France leaped up 31% in 2017 compared to the previous year. This rise confirms new energized growth of the previous year. In total, 1 019 decisions to invest in France were recorded in 2017, creating 25 126 French jobs.

These results confirm the upward cycle observed published in Business France’s April 2018 report on internationalization.

However, the auditing divisions of private organizations cannot offer an exhaustive analysis as, unlike Business France, they can only reflect investment decisions that have been publicly announced or listed.

But beyond the methodological differences – which explains a slight variation in results – Business France and EY reach the same conclusions: France is particularly dynamic and is closing the gap with its German and British counterparts.

Despite Brexit, The United Kingdom manages to keep the attractiveness lead in Europe in 2017, with 1 205 investmen projects. But the number of projects grew only 6% from 2016, against 20% between 2014 and 2015. Germany comes second with 1 124 new investment projects (+6%).


An highly attractive industrial fabric

The United States are the undisputed leader in foreign investment and job creation in France, with a 40% increase in the number of projects, as highlighted by EY. Half of the 223 American investment decisions in France relate to industrial sites, R&D centers and international headquarters.

On which sectors are the most attractive to foreign investors, Business France and EY share the same conclusions: French industry remains very attrative. Despite a drop in industry as a share of French GDP, her industrial fabric remains very attractive and foreign investments in production activities have shot up by 52% in 2017, with 323 investment decisions according to EY’s barometer. According to Business France, industry represents 26% of all foreign investments, creating or maintaining 16 213 jobs.

On the global scale, France is part of the great innovating countries and more than 8 in 10 leaders perceived her as a creative economy. France is third in Europe, behind the UK and Germany. A notable example: e-commerce giant Amazon announced in May 2017 that it would open the its first research unit in France dedicated to drone deliveries, with a dozen engineers developing a drone-based traffic management system.

An increasing number of foreign investors have decided to settle in France’s decision centers. Last year, 59 new companies have based their decision centres in France, 4 times more than in 2016. For example. Business France announced in April that Singapore’s H3 Dynamics, specializing in tele-robotics, set up its first European decision center and an R&D center, in Paris. This dynamic has allowed for France to reach second place of European countries where investors base their headquarters, behind the United Kingdom. An off putting fiscal framework


An off putting fiscal framework

However, this is not a time to rest on one’s laurels: Business France and EY insist on the fact that France has efforts yet to make to become a dream world for foreign companies. France’s fiscal framework for example, is judged too high for companies and notably discourages “the implantation of social headquarters”, highlights EY.

“As long as our deficit does not go down, French fiscality will remain a source of concern for foreign investors”, confirms Brice Lecourtier. “Therefore it is crucial that we stabilize or fiscal landscape to reassure them!” Business France’s director general also insists on lightening bureaucratic structures, “by reducing or restructuring administrative procedures for example”.

Other examples of room for improvement, foreign bosses note, in this order: fiscal competitiveness, administrative simplification and the continued reform of France’s labor laws. Worries also flagged by Business France. These have all been taken on by the government which has pledged sweeping labor law and fiscal reforms. Efforts celebrated by leaders of multinationals in France: 95% of them have said the government’s policies are moving in the right direction, as highlighted by Business France in its December barometer.

[1]  Investment projects include an initial implementation or a site extension with new jobs created.


Source: AFP

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