Head of France
On average, at least four foreign investment projects target France every day, maintaining or creating 120 jobs. What’s driving the growth in FDI?
The business environment in France has been transformed over the past five years, leaving many foreign investors surprised at how far it has come from the days of high taxes and high-risk employment disputes.
This pro-business shift largely stems from President Macron’s “business-friendly” tax and employment policies. Macron’s vision is to bring France more in line with a globalised economy that will attract foreign direct investment (FDI).
The main drivers for investors are lower corporate taxes (26.5% as of November 2022) and 40% fewer employment tribunal cases now that dismissal charges have been capped, according to DLA Piper.
Macron’s pro-business agenda pays off for foreign investment
There are already signs that Macron’s policies are working. Foreign investment in the country grew by 32% in 2021, surpassing 2019. The most active investors in France come from Germany (18%), followed by the US (15%), the UK (9%), Belgium (7%) and the Netherlands (6%).
However, when it comes to FDI-related job creation, American multinationals take the lead with 512,000 jobs created in 2021, followed by Germany (325,000), Switzerland (300,000), the Netherlands (166,000) and the UK (165,000).
Many companies have expanded in France after the uncertainty of Brexit trade negotiations. The three most active industries to attract foreign investment in France in 2021 and significantly contribute to job creation were wholesale and retail, IT services consulting and business services.
International pharmaceutical and MedTech companies have also been increasing their footprint there in recent years, including Merck KGaA, HTL, Recipharm, Medicom, Tokibo and Getinge, as have financial services businesses such as AQMetrics. International companies are attracted to France’s R&D tax credit of 30%, which falls to 5% for R&D expenditure above EUR 100 million.
We are also seeing activity among commercial real estate loan servicing companies, in tune with fundraising developments in the private debt market, notably private equity funds. Asset management entities are expanding their operations in France, as are energy companies from the UK to as far away as Singapore.
Reality vs. perceived challenges of doing business in France
France’s historically high corporate tax rates are a thing of the past and are now in line with those of the US.
But memories run deep. That is why some may be forgiven for thinking that France still has sky-high corporate tax rates. France’s corporate tax rate averaged around 37.45% between 1981 and 2021. In 1981, it sat at an all-time high of 50%. Today it is at an all-time low of 26.5%.
These changes have helped forge a greater confidence among foreign investors to bring their operations to France. No surprise then that France remains the leading host country for international investment in Europe.
There is some comfort that France has one of the lower inflation rates in Europe, at around 6% at the time of writing. In comparison, the UK and Germany were both 10%.
Any company looking to relocate or set up operations in a new market will have concerns about differences in business culture and labour relations.
There is an outdated assumption that the French have long lunches. In fact, lunches in the French workplace are typically one hour, but never taken at your desk. If, however, you are going to have a social or business lunch with colleagues or clients, allot two hours, much as you would anywhere else.
General strikes, while disruptive, can be stopped in France through what Time magazine called a “constitutional manoeuvre”.
Why is France attracting highly skilled international talent?
For the most part, international talent is gravitating to France for its high level of job creation, relatively lower cost of living compared to other parts of Europe and its world-renowned free higher education system.
Having ample highly skilled talent is a boon for industries such as pharmaceuticals, manufacturing and logistics, which have seen record investment in France since the pandemic. For example, the number of manufacturing investments jumped 50% between 2020 and 2021 to 460, accounting for 15,000 new jobs.
Salaries, thanks to lower living costs and lower inflation, are on average 20% below those of markets such as the UK and Luxembourg, which is a notable cost difference for companies coming to France.
It’s safe to say that the old stigma of a French relaxed work ethic is outdated and FDI growth looks here to stay.
Why Intertrust Group?
- Intertrust Group has more than 70 years’ experience providing world-class trust and corporate services to clients around the world.
- We are experts in management and administration services to operational companies and holding structures across the globe.
- Intertrust Group offers a full set of management and administration services including – among others:
– Company incorporations
– Directorships for non-French resident investors
– Financial reporting according to French GAAP and other accounting standards
– Company secretary services
– Corporate legal matters
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