It is the fifth largest economy in the world and Europe's largest country in terms of area: France is also the European leader in terms of foreign investment, followed by the UK and Germany.

The USA has long since discovered France as an attractive business location: As early as 2005, it made the highest direct investments and was responsible for the most job-creating measures there. In 2019, they became the top foreign investors in France with 238 projects. Germany follows with 180 investment projects and is therefore France's second largest investor.

France's economic attractiveness also ignited our decision to build another site there. It brings numerous benefits for our clients. Learn more in this article by Alain Parent, partner at enomyc in France.

Business Location France: The Facts

France is Germany's most important European trading partner. According to Statista, in 2019 goods worth approximately 106.73 billion euros were exported from Germany to France. Strategically located, France is also well connected globally - especially in Europe, but also in Africa and the Middle East. At the same time, network coverage and communications infrastructure are highly efficient and electricity prices are stable - ideal conditions for driving forward projects, especially when it comes to Digitalisation.

In terms of its investment in research and development, France leads the way in Europe: according to the government plan, 57 billion euros should be invested between 2018 and 2022 in ecological change, education and training, innovation and digitalization. Only a few days ago, the "National Hydrogen Strategy" was presented, which is linked to investments of 7.2 billion Euros. According to France's President, Emmanuel Macron, one million electric cars and hybrid vehicles are to be produced in France every year until 2025. A current study on digital competitiveness by the European Center for Digital Competitiveness (ESCP) shows in parallel: France has become the leading "digital riser" within the G7 between 2017 and 2019. The country has improved by 95 ranks.

In addition, the French labor market offers many qualified specialists with a tendency to have a higher availability than in Germany. At the same time, the French B2C market is gigantic and highly attractive for German industry partners: German retailers, such as Lidl, are growing disproportionately fast in France. And these are just some of the advantages. France offers concrete growth opportunities for German companies in the mid-market sector.  

Entrepreneurship in France

France and entrepreneurship - it seems that this idea has not been very widespread in the past: "The trouble with the French is that they don't have a word for entrepreneur", George W. Bush is said to have said to Tony Blair. Although there is no hard proof of this, but the reality would go a long way towards proving this statement wrong: France offers a very dynamic market for entrepreneurship. Among other things, the country hosts the world's largest start-up campus: Since 2017, "Station F" has been installed in the Freyssinet hall in Paris and attracts numerous savvy companies worldwide.

"ETI" and "PME": The French middle class

In France, the "ETI" (Entreprises de Taille Intermédiaire) and "PME" (Petites et les Moyennes Entreprises) are the steam engine of the French economy. They are represented by more than 6,000 companies. They account for 25 percent of jobs nationwide and 26 percent of investments.

SMEs are at the heart of the French economy, and this beats primarily in the industrial sector - and more regionally than in the metropolises: 75 percent of medium-sized production facilities come from medium-sized cities, and 68 percent of headquarters are located outside the Île-de-France region. However, SMEs in France do not only account for a quarter of the entire labor market: Its share of French exports is 34 percent. Nevertheless, French SMEs export far less than their German counterparts - we still see a lot of potential for France in this area. The complementarity to the European export champion Germany is obvious. In Africa, however, where French is still widely used as a trading language and economic relations have existed for generations in some cases, France has a clear advantage.

enomyc in France

In terms of infection rates, France is currently one of the countries in Europe most affected by the COVID-19 global pandemic. Many companies are struggling with scarce cash flow and, under similar conditions to German companies, receive a government-guaranteed loan, the "PGE" (Prêts Garantis par l'état).

For us, this is one more reason to focus intensively on France: "Many of our customers have subsidiaries in France, whose economic development has an influence on the German parent company", says Uwe Köstens, Managing Partner of enomyc, "Against this background, we must be able to assess these subsidiaries with regard to their performance. Especially now, with a view to the pandemic development, considerable risks can arise for German companies. “

Alain Parent+Guillaume BastienAlain Parent and Guillaume Bastien, Partner at enomyc in France

"In Germany there are about 18,000 companies that generate annual sales of between 80 and 500 million – "German Mittelstand" is a household name worldwide and "Made in Germany" is a synonym for quality and innovation. "In France, there are more than 6,000 companies in a comparable category," says Martin Hammer, Managing Partner of enomyc. Many of these companies will – in view of the much more pronounced corona effects in France - must undergo considerable restructuring in order to survive in the European market. In this context, enomyc's many years of restructuring experience can also make an excellent contribution to the economic recovery of affected companies in France. “

Although investments in France have been significantly reduced for the first time in years due to the pandemic, the foundation remains solid. France has already undergone profound economic changes in recent years. As a result, the framework conditions for companies and investors have changed significantly in some cases - also for the better, if one looks at developments in labor law, for example. In April 2019, the PACTE law was passed, which is intended to simplify and promote not only the growth and transformation of companies but also corporate financing and other measures for entrepreneurial development.

"The really exciting thing about the French market is the different lead generation of restructuring projects," says Martin Hammer. "In Germany, the pressure for change is largely determined by the financing institutions in the form of restructuring reports. French financial institutions do not have processes in this form. The consultant in France has to take action himself and convince with excellent references and an impeccable track record in performance-based restructuring. This is where we see our particular strength, due to our performance-based approach".

The pandemic and the resulting crisis that both Germany and France are currently experiencing are acting as an economic catalyst: As expected, 2020 and 2021 will be the most decisive years for many companies. Whether with or without PGE, the French market is expected to open to almost all industries, offering completely new business models and options.

Stay up to date with us. We will shortly be reporting on the importance of intercultural skills and the influence of cultural factors on business success, especially in France.

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