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Western Europe / France

How FDI in France remained resilient during the Covid pandemic

In a bleak year for foreign direct investment, France weathered the Covid-19 storm in 2020 relatively impressively, seeing a smaller dip in FDI inflows than most of its neighbours.

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France may have endured mass lockdowns as a result of the Covid-19 pandemic, but its FDI performance has proven resilient. (Photo by Thomas Samson/AFP via Getty Images)

In March 2021, Business France published its Annual Report 2020: Foreign Investment in France. The report revealed that while the Covid-19 crisis has caused investment flows into the country to fall by 17% from 2019, it has experienced a softer shock compared with the wider European region (-19%) and worldwide (-33%).

France attracted 1,215 new foreign direct investment (FDI) decisions in 2020, more than half of which were supported by Business France. It should be noted that while this signifies a 17% decrease, 2019 was a record year for investment in the country, with an 11% rise compared with 2018. The 2020 figure is also in line with the previous five-year average of 1,233. Approximately 35,000 jobs were created or maintained in France by foreign subsidiary investments in 2020. Although this represents a 13% drop compared with 2019, it was the second best year for job creation in the past decade and a 14% increase on 2018.

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The Covid-19 pandemic did not impact the type of investment in France, with new projects remaining in the majority. More than half of all investments in 2020 were in newly created projects (637), followed by expansions (541) and takeovers (37). Expansion projects were the leading project type in terms of job creation, accounting for more than 50% of all jobs generated by foreign investors in France. Half of these jobs were linked to extensions of existing industrial sites.

More than 60% of FDI in France comes from Europe

There were 60 source countries investing in France in 2020, with European investments continuing to lead the way (64%), followed by North America (20%) and Asia (10%).

The US remained the top source country for foreign investment in France. US-based companies were responsible for 17% of all FDI projects in 2020 and one-quarter of jobs generated (a 5% increase on 2019). US-based companies also accounted for one-quarter of all inward R&D investments. In 2020, New Jersey-based medical technology company Becton Dickinson announced plans to invest $176m in its Pont-de-Claix site in Isère, which operates as a reference centre for the production of pre-fillable syringes and houses the unit’s global R&D centre.

Germany-based companies created 201 projects in France in 2020, the second-largest source of investment in the country. Germany was the leading manufacturing investor, and was responsible for about one-third of foreign investments in retail outlets and more than 20% of projects in logistics.

Germany-based automation giant Siemens recruited 850 people in France in 2020, including 450 on permanent contracts, with a focus on its sites in the Île-de-France region and Toulouse. The new hires included engineers in the fields of energy efficiency, software, cybersecurity, embedded systems and big data.

The UK was the third most popular source country for foreign investment in France. UK-based companies were responsible for the creation of 120 projects in 2020, a 31% drop from 2019. This can be attributed to uncertainty post-Brexit and following the onset of Covid-19. According to the Business France-Kantar survey on France’s attractiveness, most UK businesses have implemented a wait-and-see policy on the country, with investments into Europe falling by about 35% in 2020.

UK-based unicorn Graphcore, a semiconductor company that develops accelerators for AI and machine learning, established a subsidiary in the Île-de-France region in April 2020. It aims to develop commercial and R&D activities in France and to employ about 50 staff by 2023.

Despite the difficulties associated with investing during a pandemic, France saw a sharp increase in investments from several countries, including Ireland (a 50% increase in project numbers compared with 2019), the Netherlands (43%), Spain (9%) and Denmark (7%).

Manufacturing represents one-quarter of all French FDI projects

Manufacturing was the leading business activity for FDI in France in 2020, accounting for 25% of all investments. Decision-making centres represented 274 projects, 24% of which were French headquarter projects and 16% of which were global or European headquarter projects. Both retail outlets and business services made up 13% of all investment.

Wholesale and retail was the top sector for FDI in 2020, accounting for 12% of all investment. It was followed by software and IT services (11%) and consulting and business services (8%).

The sectors most negatively impacted by the Covid-19 pandemic include hospitality, tourism and restaurants (-57%), aerospace (-56%), transport and storage (-38%) and machinery and mechanical equipment (-36%).

According to the Business France-Kantar survey, medical expertise is recognised as one of France’s specific strengths compared with its European neighbours. Investment in healthcare, covering the pharmaceuticals and biotechnologies and medical/surgical equipment sectors, rose by 40% in 2020. The majority were factory expansions, including Sweden-based Recipharm, a manufacturer of mRNA vaccines, and Germany-based Fresenius, a provider of products and services for dialysis, which both created 100 jobs at their facilities in Centre-Val de Loire and Auvergne-Rhône Alpes, respectively.

France’s strong FDI performance despite Covid-19 can be attributed to three years of reforms aimed at strengthening its investment landscape. The Pacte Act of 2019, relating to business growth and transformation, and the ASAP Act of 2020, aimed to accelerate public action, and were enacted with the intention of making it easier to invest in the country, as well as implement corporate and income tax cuts. In addition, the French government’s €100bn ‘Relaunch France’ economic stimulus plan to counteract the impact of the pandemic aims to create jobs, develop skills and make the country even more attractive to foreign investors.

Naomi Davies

Naomi Davies

FDI consultant

Naomi Davies is an FDI consultant at Investment Monitor, with expertise in location benchmarking and cross-border investment.