Outlook for investment in France: dynamics vary by sector with manufacturing firms leading the way according to the results of the EIB’s annual survey

• Private sector drives investment revival in France
• Manufacturing firms stand out from the rest by focusing more on new products, internationalisation, technology and innovation
• Availability of staff with right skills is considered less of an obstacle to investment by French businesses than in EU as a whole, while labour market regulation is more of a concern in France than across EU
• Surveyed for first time, local authorities are satisfied with overall infrastructure quality, but recognise investment gap

In France, investment is rapidly approaching the level before the 2007-2008 crisis, but under-investment phenomena still persist in some areas of activity. The 2017 EIB Group survey on investment and investment finance (EIBIS) in France, conducted at over 600 French firms, shows that the majority of economic operators increased their investment during the last financial year and will continue to do so in the current year. Uncertainty about the future and labour market regulations are, however, the most commonly mentioned obstacles to investment.

The results of the survey were presented in Paris today at a conference hosted by the European Investment Bank and the Bank of France. This forum provided an opportunity to reflect on ways of making the positive investment trend currently observed in France sustainable and more widespread. This year, the EIBIS was accompanied by a survey on infrastructure investment by local authorities, which helped to obtain a broader picture of the debate. The EIB also presented, as an example, an up-to-date overview of its financing activity under the Investment Plan for Europe (Juncker Plan), which shows that France has become the leading beneficiary of the funds available thanks to the Community guarantee provided by the Plan. 

The EU bank’s Vice-President Ambroise Fayolle, responsible for EIB operations in France, stated: “We are seeing a real return to investment in France, driven by the private sector and businesses in the manufacturing industry in particular. The first impacts are already being felt in terms of employment. Investment in public infrastructure, on the other hand, has been decreasing steadily since 2013, with a significant decline in the fields of transport and education. Through its dedicated products, the EIB can help to reduce the investment gap which grew during the years of the financial crisis and create an investment-friendly ecosystem, particularly for innovative fledgling companies, and also by focusing even more strongly on the opportunities offered by the Juncker Plan.”

Governor of the Bank of France François Villeroy de Galhau said: “Investment and innovation are the key to sustainable and balanced growth. To be able to innovate, businesses must be in a position to take risks, and this requires more equity financing. This is why I am in favour of creating a financing union: a comprehensive and ambitious structure enabling Europe’s EUR 400 billion savings surplus to be channelled into innovation.”

EIB Economics Director Debora Revoltella, pointed out: “Uncertainty about the future and labour market regulations are considered by French firms to be the main obstacles to investment. On the other hand, the availability of staff with the right skills is less of a concern in France than in the rest of the EU, also thanks to the fact that French businesses are ahead of the field as regards the proportion of investment dedicated to staff training. At the same time, around one in three firms consider that professional training and higher education should be the main priority of public investment in the near future. To prepare for the future, it is therefore important to boost investment in human capital and in research and development.”

Main results of the EIBIS

Private sector companies: the majority of firms in France confirm that they increased their investment activity in the last financial year and 85% of firms made investments during the same period, an identical figure to that of the previous year and similar to the EU average (84%). However, the number of French firms that feel they are lagging behind in terms of state-of-the-art machinery and high energy-efficiency buildings and facilities appears to be higher than in neighbouring EU countries.

Firms in the manufacturing sector (94%) were more likely to invest than those in construction and services (81% and 74% respectively). These firms are also more committed to investing as a priority in new products and services, staff training, development abroad and innovation on an international level. Finally, it is these companies that are most likely to report that they are not investing enough (23%) in relation to the requirements of their markets.

Uncertainty about the future is the most commonly cited barrier to investment. The availability of staff with the right skills is less of a concern to firms in France (62%) than in the EU as a whole (72%), while labour market regulation is more of a concern in France (71%) than in the EU (62%). In France, external finance, especially bank loans, account for a greater share of investment finance than internal funds (51% versus 46%), unlike the average of companies in the rest of the EU.

With regard to public investment priorities, around one in three firms (32%) consider that professional training and higher education should be the main focus of public investment over the next three years. This was followed by transport infrastructure (selected by 16% of companies) and telecommunications infrastructure (11%). This is different from the EU average, whereby around one in four firms perceived professional training and higher education to be the key investment priority areas, followed by transport infrastructure (24% and 23% respectively).

Local authorities: French municipalities were on the whole more satisfied with the quality of infrastructure than municipalities in other European Union countries on average. However, they consider that health and education are the sectors where the investment gap will be the most difficult to reduce over the next five years. The main barriers to local infrastructure investment are constrained budgets and debt limits. Compared to the average of EU municipalities, local authorities in France have a greater tendency to finance infrastructure from external sources, relying in particular on banks.