Business France together with the French-Finnish Chamber of Commerce in Helsinki, Team Finland and the Economic Development Department at the French Embassy in Helsinki, gathered local investors and companies at a seminar in Turku to talk about what is going on in France and provide them some key insights to succeed on the French market. Here are summarized some of the most interesting facts for investors, presented by Axel Berggren-Lagercrantz, Senior Investment Advisor for Sweden, Finland and Estonia at Business France.
President Macron is turning France into a country where working and investing pay off
President Macron’s message to foreign investors is loud and clear: “France means business, choose France as your next investment destination”.
For several years, France has been conducting a series of structural reforms to increase its competitiveness and make its market more attractive. President Macron is accelerating the pace of these reforms, focusing on the modernization of the labor market and the ease for SMEs to start and run their business. If this strategy is good for French businesses and workers, it also benefits a lot to foreign investors.
The labor market reform is of Nordic inspiration
The labor market reform, that passed on September 2017, simplifies the framework of negotiations between companies and their employees and makes the procedure clearer for employers in case of litigations. Here are some of the most important measures to remember:
- Companies can now reach deals directly with their employees rather than complying with branch agreements on working hours, pay and overtime.
- The damages that courts can award for unfair dismissals are now limited to a certain amount and procedures will be limited in time.
- Employers are now allowed to introduce conventional collective dismissal procedures in the company, the amount of compensation being set in the company agreement.
- The merger of staff representatives into a unique “Social and Economic Committee” (CSE).
Taxes cuts on companies and on capital investment
- Profitable multinationals are now allowed to close lossmaking plants based in France.
- Corporate tax rates will decrease, from 33% today to 25% by 2022, and thus align with the most competitive countries in continental Europe.
- A final “flat tax” of 30% on all investment income has been introduced, including dividends, interests, capital gains, carried interest and director’s fees.
- The wealth tax (ISF) has been abolished and replaced by a real estate wealth tax (IFI) that is assessed only on the real estate of the taxpayer is valued at an amount exceeding €1.3 million.
How can foreign investors and private equities take advantage of these reforms?
If this set of reforms is good for French businesses and workers, it will also benefit to foreign investors.
Regarding private equity, the most interesting investment opportunity might be in SMEs, thanks to the PACTE legislation that will encourage diversified financing (IPOs, private equity, crowdfunding and ICOs) and foster private savings channeled towards companies’ equity to finance innovation. The 14% of personal savings that French people invest today in low-yielding savings accounts and life insurance may be redirected to company equities in the coming years, on the part of long-term savers.
These new incentive scheme to finance growth with equity should be attractive to investors, who have invested €16,5 billion in private equity in 2017, an increase of 12% compared to 2016 (Source France Invest).
Did you know that France is among the top European countries in terms of FDI? (Source EY France attractiveness survey 2018 )
With an increase of 31% compared with 2016, France has registered 1 019 foreign investment decisions in 2017, which is by far the most important progression in Europe (+6% in the UK and Germany). Paris has also managed to outpace London to become the most attractive European city for foreign investors.
Most investments have been made in industry and R&D, these two sectors accounting for more than 400 investment projects. France is also crystallizing attention by claiming its ambition to become the European leader in innovative sectors like artificial intelligence (AI), which is being achieved as evidenced by the installation of several large companies such as Facebook, Microsoft, Google, Fujitsu or Samsung, that have decided to open research centers in the Paris region.
Do you have an investment project and would like to get some support, please contact Axel Berggren-Lagercrantz.