International tycoons are having second thoughts about investing in France mainly due to the country's political instability, says a new survey of 200 managers of foreign-owned companies.
After several years in which France became the number one European destination for new headquarters, research centres and factories, the tide, according to the findings of the consultancy firm EY, appears to be turning.
A barometer of France's attractiveness – carried out between 3 and 21 October – found that 118 of the bosses said the fractious political landscape following last summer's snap parliamentary elections was making it difficult for them to build a business plan.
Nearly half of them feared the political skirmishing would lead to a slowdown in reforms to cut red tape and they were also worried about whether it would cost more to employ people.
"Executives are still counting on France, particularly for investment in innovation and services," said the report. "But they are more reserved about locating factories and headquarters in France."
Importance
In France, according to the government statistics agency Insee, 17,500 companies are under foreign control and employ 2.2 million people, some 13 percent of the salaried workforce.
"Foreign-owned companies are one of the major driving forces of our economy and that of our regions," the report says.
However, survey researchers discovered that even though the vast majority of bosses were not planning to invest any more money in schemes in France this year, more than half planned to fund research and development projects in the country until 2027.
The business leaders warn that as France has become politically brittle, the recently elected Labour government in Britain with its huge parliamentary majority, offers a more stable environment for investment.
Eighty-four bosses said Britain seemed more attractive than France while 58 disagreed. However, they were all united in their negativity about Germany.
Confidence
"After a period of constancy that had restored confidence, France has to show sensitivity to criticism of its stability, tax system, labour costs and its ecological ambitions," the report said.
The EY report comes just six months after the Choose France forum in Versailles yielded a record amount of investment of 15 billion euros, for 56 projects.
But the report adds: "Since then, and in light of the profound changes in political governance and the resulting uncertainties, questions about France's attractiveness are regularly asked by companies, public players and the media."
The bosses say they want the government to maintain the drive to cut business tax and reduce the bureaucracy involved in setting up a business.
They also want authorities to simplify the rules and speed up the time for allocating industrial sites. There is also a call for clearer guidelines on environmental schemes around factories.
The report adds: "Executives also point to four long-term challenges – innovation, energy, support for small and medium-sized businesses and reindustrialisation – which indicate a desire for continuity in the economic course of recent years."
