France looks to boost the mid-sized sector
The French attitude to private enterprise has often been unfavourably compared to its near neighbour Germany, but President Emmanuel Macron’s new Republic En Marche government has pledged to change public attitudes towards business and growth.
Stanislas Guerini, elected in the Paris Department in June, notes that he was “…struck by the difference of the reality of life in companies and the way they are perceived in public discourse — especially by politicians. There is often a black and white view whereby small companies are seen as wonderful resources and big groups are just hungry for profits.”
Macron’s election marked a radical change from the centre left/centre right duopoly which has dominated French politics for generations. It also offers a fresh start for the nation’s business community, which has long complained of onerous bureaucracy and hostile public attitudes.
The new administration has launched a consultation process with entrepreneurs and business people to agree on ways to boost French business and help smaller smaller firms grow into mid-sized companies, employing more people and generating more revenue. France has half the number of medium sized firms in Italy and Great Britain and just a third the number in Germany.
Benjamin Griveaux, a junior minister at the Ministry of Finance and Economy and close ally of President Emmanuel Macron, is one of the drivers of France’s planned economic reforms. In a speech opening the business consultation at a conference Paris, he explained that he wants to “help the French make peace with private business” as “this reconciliation is indispensable if we are to have more successful companies in the future.”
The consultation will also look at strategies to increase the number of French exporters, echoing similar efforts in Australia to encourage mid-sized firms to target international markets. France is the euro zone’s second-largest economy but has suffered a trade deficit since 2005. In 2016 the current-account deficit reached 24 billion euros, over 1% of gross domestic product.
Finance Minister Bruno Le Maire has acknowledged that France has carried a structural trade deficit for years and although it “wont be eliminated over night“, he is “willing to look at all possible measures for doing so.”
At the same time, to retain public support, the government is examining ways to ensure that workers share the benefits of growth, not least through new profit sharing schemes. “In the end, all French people need to benefit from growth,” Le Maire noted, and “that includes employees, executives and the unemployed.”
Minister Griveaux has made clear his intention to create a French Mittelstand. He hopes the government’s efforts will create millions of much needed jobs and help France become an economic power to rival Germany, a nation which has long relied on a strong backbone of successful mid-sized companies.
On a recent visit to London to persuade companies that France now offers a pro-business environment, he prioritised the reduction of red tape to make it easier for smaller firms to hire staff and grow over the next 18 months. He noted that “We have the small companies and we have big companies, and in between are the mid-sized firms with more than 250 workers and more than €50m turnover. We have 4,000 companies like this in France.”
However regulations intensify when small companies grow to reach this scale, meaning that “Germany has 12,000, Great Britain has between 8,000 and 9,000, the same in Italy.” If French rules and regulations are reduced, he believes that there is no reason why France cannot reach that level. “This is very important because this is where the jobs of tomorrow are, this is where you can have a good exportation process. Our commercial balance has been bad for a long time because our exports are weak, and we are weak because [our small firms] don’t have the proper size to do that.”
Labour market reforms, pioneered by other Western leaders in the 1980s, will make it easier for companies to fire workers, which should also embolden employers to take on workers in the first place, reducing the country’s painfully high and socially divisive 9.8% unemployment rate.
Previous administrations have struggled to make serious reforms, typically giving way in the face of substantial opposition from trade unions. Although he has negotiated in recent months to ease union concerns, President Macron wants to use the momentum of his stunning election victory to push ahead with labour reforms.
Mr Griveaux played down the scale of recent demonstrations, contrasting union estimates of 100,000 on the streets to more conservative police estimates of 20,000 and noting that only one of the three main unions organised the strikes. “Why? Because there was a real round of negotiation, a strong discussion about all kinds of issues. And because I think we have political legitimacy by the vote last May, and it is easier when you have this political drive and political dynamic to implement reforms fast after the election.”
Australian politicians will watch Mr Macron’s progress with interest, given the widespread view that similar reforms in Australia have lost impetus in recent years and need to be rekindled to encourage smaller firms to grow.
