President Emmanuel Macron ran for office on a promise to revitalise the economy and shed France’s reputation as a place that is hostile to business. Less than a year into his tenure, his efforts have started to pay off.
“France was coming from a very low point both in terms of policy and in terms of perception,” Peter Zemsky, professor of strategy at INSEAD, told FRANCE 24. At Davos, he said, it was clear that: “Macron has shifted perceptions.”
France’s reputation for smothering bureaucracy in addition to high taxes, and a labour code that’s not business friendly, has made it hard for the country to attract foreign investment and talent.
“For the first time in a long time I sense optimism both in France and from investors looking at France,” Paul Rawlinson, global president of law firm Baker McKenzie, told French daily Le Monde in Davos.
And the “Macron effect”, as the French press has taken to calling it, has something to do with it. “He’s competent, well-versed in the details. He’s very impressive,” observed JP Morgan chairman Jamie Dimon, also speaking to Le Monde.
In his speech, Macron said he wanted to make it easier to fail and take risks in France. He alternated between French and English as he spoke, sprinkling English words like “business friendly”, “free-riding”, “hub”, “gap”, “device”, “shadow banking”, and “race to the bottom” into the French part of his speech.
But Macron is using more than words to woo the business community. In addition to recent tax breaks and labour reforms, Macron held a sumptuous dinner at Versailles on Monday where the French president asked 140 multinational business leaders to #ChooseFrance. Many of them used the dinner, billed as a “warm-up” to the Davos summit, to announce major French investments.
Facebook announced that it would expand its Paris Artificial Intelligence team and spend $12.2 million on new equipment. Germany’s software giant SAP pledged to spend €2.5 billion in France over the next five years. Toyota will invest €300 million to increase capacity at a plant in northern France, creating up to 700 new jobs. Google will open four Google hubs and add 1,000 jobs.
“France has all the assets to succeed. It has top engineers, great entrepreneurs, one of the best education systems in the world, great infrastructure, and successful global companies,” wrote Google CEO Sundar Pichai in a blog post detailing the plan.
Thirty-eight thousand engineers graduate in France every year. The country is also home to more than 9,400 startups and the world’s largest startup incubator, Station F, which opened in Paris in June.
Macron has “completely changed” France’s image, telecoms billionaire and Station F-backer Xavier Niel said Wednesday, crediting the youthful, pro-business politician with attracting an influx of tech talent.
Since his election in May 2017, the former investment banker has already pushed through labour law reforms that make it easier for businesses to fire workers. He has also sharply cut wealth and capital gains taxes. He is capitalising on high confidence in Europe and uncertainty over Brexit to lure companies to France.
A survey by the US Chamber of Commerce and consultancy Bain & Company in November found a record 72 percent of US investors were optimistic about the French economy, up from just 30 percent in 2016.
Macron is “perceived as a pro-business president”, said the Bain report. American investors see this political change as a sign of a major transformation in France, the start of “a French New Deal”.
However, the report warned that while France had made great progress in revamping its image, the UK and Germany remain better positioned to attract investment. The durability of the “Macron Effect” will depend on the success of Macron’s reforms and his ability to explain them to foreign investors, the report concluded.
Not just the ‘Macron Effect’
While Macron has won most of the credit for boosting France’s image, some of the country’s business-friendly moves predate his election. Macron’s predecessor, François Hollande, set up new visas for digital entrepreneurs while in 2015 a dozen French startups launched the WonderLeon campaign to lure overseas French talent back home.
“What I’m seeing right now is that France is starting to look like what I saw in London 10 or 12 years ago. There’s a lot of evolution. We’re on a good path,” said Jean-Michel Petit, CEO of food startup VizEat, speaking at a WonderLeon event in 2017.
Venture capital investment increased to more than €2.2 billion in 2016, putting France second only to the UK on the European startup scene. France took the lead in the first eight months of 2017, raising €2.7 billion nine times more than for the full year of 2014.