The political and legislative uncertainty in France following the snap elections in June is sowing doubts among those looking to invest their capital in Europe. After five prosperous years, during which France was perceived as the most attractive country on the Old Continent for setting up head offices, research centers and factories, the tide seems to be turning, fueled by the feeling that Europe must do more to resist American protectionism and Chinese ambitions. These are the findings of the EY consultancy firm, which has been surveying 200 CEOs of foreign-owned companies for the past 20 years.
According to a "special edition" of this survey drawn up in October, half of these decision-makers believe France's attractiveness has worsened since June, and the same proportion (49%) has already reduced its investment plans in France, including 12% in a "significant" way. "We're coming out of a long period of consistency [on economic and fiscal fronts]," explained Marc Lhermitte, partner at EY and co-author of the study. "This barometer reflects a new instability."
Executives are wondering about future legislative or regulatory choices, worrying about the slowdown in reforms and administrative simplification, and alarmed about debt and the budget deficit. However, it should be noted that these concerns have not yet led to the cancelation of investment projects, but rather to a wait-and-see attitude. Nearly six out of 10 executives said their projects had been postponed "at best" until 2025.
These delays in investment decisions could influence economic activity and reindustrialization: in 2023, foreign-owned companies were behind 400 industrial investments, of which 40% were in medium-sized towns. They contributed 16% of gross domestic product, employed 2.2 million people, or 13% of total employment, and accounted for 35% of industrial exports, pointed out EY.
France is not the only country subject to questioning. "These foreign companies consider the situation in Europe as a whole to be rather worrying," said Lhermitte. "There is fatigue in the face of the economic and commercial fragmentation of European countries." Going through an economic and political crisis, Germany is also experiencing a certain degree of disaffection.
In comparison, the United Kingdom, which lost a lot of ground following the Brexit vote in June 2016, is regaining some favor with investors: more than seven out of 10 executives believed it had become more attractive than France over the past six months. It's an upturn that might appear to be a threat to France. Indeed, London remains Paris's main rival for head office locations and tech investments.
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