Successfully investing in France

last updated on 7 June 2024 | reading time approx. 3 minutes

How do you assess the current economic situation in France? »
How would you describe the investment climate in France? Which sectors offer the largest potential? »
What challenges do German companies face during their business ventures into France? »
How does France's energy supply influence economic development? »
In your opinion, how will France develop? »

How do you assess the current economic situation in France?

The economic situation in France is stable. The COVID crisis and the war in Ukraine have hit French companies hard despite an active policy of support by the government and the European Union. The government's reindustrialization policy is beginning to bear fruit. Since 2017, 130,000 jobs have been created in France in industry, but it has not managed to return to its pre-2019 level of production. The results of the French economy are somewhat encouraging, as evidenced by the 0.2 percent growth in its GDP for the 1st quarter of 2024 and the optimistic forecasts with growth of nearly 1.2 percent in 2025. Inflation is under control and has begun a long downward movement.

However, France has one of the largest trade deficits in Europe with 59 billion euros in 2023. Its debt, despite the recent maintenance of its rating by Moody's and Fitch, remains one of the highest in the European Union and exceeded 3000 billion euros at the beginning of 2024. Its public deficit represents nearly 5.5 percent of the GDP.

How would you describe the investment climate in France? Which sectors offer the largest potential?

The investment climate in France is encouraging. With 1,194 projects announced, France retained the 1st European place in 2023 for welcoming foreign investment, for the 5th consecutive year according to EY yearly study on attractivity of French economy. Despite the inflationary context and geopolitical tensions, France retains a unique attractiveness in Europe, due to the multiple reforms in favor of the green industry, more flexible regulations and legislation and more favorable taxation. The country's historical fundamentals (skills, infrastructure, market) form the basis of France's attractiveness in the eyes of international leaders, who designate them as the main "factors of positive influence".

Establishments and industrial extensions in France are less dense in terms of jobs (35 jobs created on average) than in the rest of the main countries receiving foreign investment in Europe (49 in Germany, 61 in the United Kingdom), undoubtedly in correlation with the cost of labor.

The main investments are directed towards green industry, particularly in the energy sector, and recyclables, electrical and electronic equipment, and agri-food, which each represent nearly 5 percent of projects. In 2023, France saw the establishment of gigafactories in charge of the production of electric car batteries, particularly in the north of its territory. Nearly four gigafactories are to open in the region, which aims to become the European valley of the electric car.

What challenges do German companies face during their business ventures into France?

German investors face several challenges:

Taxation is still considered too heavy: despite numerous reforms in this area by the government, taxation is perceived by investors as a brake on development
A deteriorating social climate: the many reforms carried out by the government have given rise to major social movements
Administrative and regulatory complexity: this is tending to decrease due to in-depth work by the government aimed at halving the requirements in business law
Energy: after having been the strong point of the French economy for years, the latter with the war in Ukraine has seen its cost increase substantially.

Why should companies choose to enter/remain in the French market?

In 2023, France is the 7th largest economic power in the world according to the International Monetary Fund and the 3rd largest economy in Europe behind Germany and the United Kingdom. With a nominal GDP of $3,052 billion, France is behind the United States, China, Germany, Japan, India, and the United Kingdom. The French economy is an increasingly open economy, occupying an important place in international trade, mainly within the European Union. France is 6th in terms of exports and 5th in terms of imports. The advantageous tax treatment granted to research and development has enabled France to rise to 8th place in the world for the number of patents granted in 2023 and thus increase its economic attractiveness.

France is present on all seven continents through its overseas territories. Its Atlantic coast in the west of the country, and its Mediterranean coast in the south, make France the gateway to Europe for both the American and African continents. France has significant industrial know-how due to the historical presence of many industries on its soil. Many multinationals and key players in the global economy have their headquarters in France. The government is pursuing a policy that is favorable to the establishment of companies from both a fiscal and regulatory point of view.

In your opinion, how will France develop?

France has optimistic growth prospects for 2025 according to the French Ministry of the Economy, which remains to be confirmed. The development of several large-scale industrial projects heralds the creation of new jobs in France and an increase in investment. The reindustrialization of France remains timid in its development but is encouraging. Two factors limit the effects of the reindustrialization policy, namely the cost of energy and the labour market, in particular the cost of labour. The government has committed to considerably simplifying and streamlining the legal and regulatory framework for the creation of companies and companies. The Minister of the Economy has launched extensive consultation work that should lead to halving the Commercial Code and making France more attractive to investors. The key challenge in the coming years is the capability of France to reduce the unemployment rate, which remains at a high rate (7 percent), despite 350.000 unoccupied jobs. The government intends to meet this challenge through structural reforms of the labor market, such as increasing the incentives to take unoccupied jobs.