France’s economic and political history has elevated it to the status of one of the leading industrial economies. This is in sectors such as, aerospace, power generation and pharmaceuticals. The nation is classified in 11th place in the “Best Countries” ranking by US NEWS. However, France’s economic impact and influence have been decreasing slowly, and taking a more secondary position on the global stage.
A brief history of France
“Les trentes glorieuses”, the thirty years following the end of WWII, were seemingly the best years for the French economy. Following the toll it took economically during WWII, the French economy grew by an average of 4,1% in terms of GDP per inhabitant. This marked an even faster growth than the recovery of both the USA and the UK. And, this also serves to show how the French Government has long been very hands-on and influential government.
France played a massive role in post-war Europe’s reconsutrction period, mostly by setting clear economic targets and priorities. And it did so by choosing to leave it up to French private enterprises to achieve and apply them – a method known as “Contrats de plan”. Railways are one of the biggest industrial economies of the last century. The fast development of the French motorway system was achieved by a public investment. This investment was offset by the sale of long-term concessions to private companies to operate and maintain them.
Along the same lines, Renault became one of the biggest companies in the early years of the automobile sector. This was achieved with the help of the French government, who still own a 15% stake. These are only two examples of France’s economic success. France was also the first country to plan and execute high-speed rail network. The country now has the world’s second most extensive rail system.
Times have however changed. Even if France is still leading in many industrial sectors, its power and worldwide impact are not comparable to what they once was. There is even speculation that France might have become more of a symbolic power rather than an actual one. This is through two main factors.
Firstly, Trans-Atlantic ties are damaged severely. For example, Macron criticised the antiquity of NATO, and called the other member states to form an alternative security alliance. Another example of the ways in which Trans-Atlantic relations have deteriorated is the AUKUS security agreement. The cancellation of the agreement with Australia by the UK and USA meant a loss of almost 66B$ for the creation of 12 submarines for France. France’s foreign Minister, Jean-Yves, described it as a “stab in the back” on the radio.
In addition to this, this move also represents the rejection of France as an essentially powerful country. The second situation in which France is undeniably losing power is in its relationship with North Africa. Macron’s statements about Islam and his decisions surrounding anti-Islamic ideals have weakened his position in France’s past colonies. This has weakened essential ties with the French government and the French economy.
Brexit’s Impact on France
France seems to be losing its power in the international scene. Brexit has however, created a new gateway for the French economy. The Bank of France’s governor, Francois Villeroy de Galhau, said that Brexit has driven 2,500 jobs and at least 170B euros to France. This has made Paris one of the most popular cities in Europe for new investment in financial, professional, and business services.
Brexit is supposed to bring along a long process of adaption to a new political atmosphere. That is why the EU and the UK have come up with a series of agreements to ease this transaction. The EU is for example allowing London clearinghouses to operate across the continent for 18 months. However, once these 18 months have passed, financial transactions in euros will be settled within the EU. The most likely destinationswill be Paris, Amsterdam, or Frankfurt.
One example of the consequences of Brexit for the French economy is the transfer of HSBC’s seven offices. These moved from London to Paris in 2019. HSBC’s new presence in Paris is due to the adjustment of its activities regarding political and regulatory developments in Europe. No matter what, this announces itself is likely a huge financial step for France in the global financial market. France has made a strong statement of its economic power.
Start-Ups in France
One crucial aspect of France’s impact in the world can be made by inspecting the capital risk in French start-ups. Macron’s “Scale Up” plan instituted first in France and then proposed to the EU is shown to be a promising way to develop France’s stance in global capital markets.
Over the past 20 years, France’s capital market legislation has developed into a modern legal framework. Integrating EU initiatives and directives for its development, with the result of venture capital growing steadily since 2013, supporting the development of start-ups and the growth of their activity. The latest reports show very positive results for France. In the first five months of 2021, start-ups have risen €5,1B in capital venture, that have permitted the start-ups ContentSquare (500M$), Back Market (335M$) and Shift Technology (220M$) to earn the unicorn status.
The amount of venture capital has been at a steady growth as France seems to have a good potential as a start-up nation. However, France seems to struggle to produce meaningful start-up exits through IPOs and acquisitions. France has had just 28 exits over 100 million euros over the past ten years. This is far below the Start-Ups in the US or China. For example, the largest are Altice (€285M), followed by Drivy (a Cathay investment) acquired by Getaround (€268M), compared to Europe’s largest exit from 2018, like the Swedish Spotify(€50B) or the dutch Adyen (€60B).