France is one of the major and most advanced European economies. As a founding member of the EU, and despite the effects of enlargement, France continues to be close to the centre of its decision-making process. As the EU expands, France will have opportunities to grow its export and trading relations. While the improving regional outlook may provide some upside potential, it may not be enough to spark a recovery in France’s manufacturing sector, unless the country addresses its competitiveness issues.

We keep our clients informed of the latest market moves and political developments in France, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 20 of France’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. Our aim is to keep you ahead of the game, so you can operate with confidence in France.

Country Risk

France Country Risk

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Core Views:

  • We believe that French economic growth will lag the rest of the eurozone over the next two years as investment growth and external demand remain lacklustre, while meagre wage growth and high unemployment mean that household consumption - traditionally the key driver of the economy - will become less able to support growth.

  • We expect the fall in global oil prices and euro depreciation which occurred in H214 to bolster France's current account balance over the next two years. Euro depreciation will increase the competitiveness of exports to non-eurozone countries, as well as make France a cheaper holiday destination. Nevertheless, a weak euro and cheap oil will paper over the cracks of the structural decline in French competitiveness over the past decade.

  • Although we are...

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France Industry Coverage (21)

Agribusiness

France Agribusiness

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BMI View: We forecast a decline in grains growth in 2015/16 in France, as yields will return to trend after extremely favourable weather in the 2014/15 season. We forecast wheat production to grow over our forecast period and expect production to reach 40.0mn tonnes by 2018/19. Milk production in the short term will not be fundamentally affected by the removal of the EU's production quota in April 2015 owing to low farmgate prices, but production will expand strongly out to 2019. Cheese production will grow strongly as international exports will be in high...

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Autos

France Autos

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In 2015 and 2016, we forecast a 1.5% and 0.7% increase in vehicle sales as weak growth in the passenger car market compensates for stagnation across the commercial vehicle (CV) segment. Indeed, this forecast is reflective of a broader story emerging throughout the French economy whereby consumer spending and retail-oriented industries, such as the passenger car market, have shown signs of at least a temporary uptick in activity. However, on the enterprise side, productive investments by businesses still remain minimal, which is dragging down CV demand.

This forecast scenario is similar to 2014 when total vehicle sales increased 0.2%, to 2,212,571 units, on the back of a 0.3% growth in passenger car registrations and a 0.2% decline in CV registrations. Growth seen in the passenger car segment remained weak due to the weak household consumption will be made worse by increasing unemployment while CVs underperformed thanks to very limited fixed...

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Commercial Banking

France Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

France Defence & Security

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BMI View:   BMI 's France Defence & Security Report examines the current structure of the French armed forces. It evaluates ongoing defence reform initiatives and examines the position of France in NATO and its defence commitments around the world. In addition, it discusses the French defence industry and its performance both in home and international markets.

Regarding defence spending we expect France to spend USD53bn on defence in 2014. We believe that France will spend an average of USD51bn on defence between 2015 and 2019 with the defence budget increasing to USD52.8 by 2019.

In terms of defence exports, official figures published during Q414 noted that the value of French military exports had increasing by up to 42% in 2013, compared to 2012. French military operations have been said to have been very helpful as a '...

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Food & Drink

France Food & Drink

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BMI View: Following three years of stagnation, during which headline GDP growth averaged just 0.3%, we believe the French economy is poised for moderate consumer-led growth acceleration over the next two years. We now forecast real GDP growth of 0.9% in 2015 and 1.1% in 2016, up from 0.7% and 0.9% previously. In April, the consumer confidence index registered its highest level since November 2010, as French households appear to be benefiting from low oil prices and the associated boost to real wage growth. Given that consumer spending is the traditional driver of the French economy, this bodes well for growth momentum over the remainder of 2015. The importance of the food industry for the economy and the fact that France is one of the few European countries with a growing, young population will leave food consumption growth...

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Freight Transport

France Freight Transport

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BMI View:  The French freight transport sector remains dogged by structural issues in its labour market and the uncompetitive nature in exports. Meanwhile, the French economy continues to lag behind the rest of the eurozone despite its regional peers showing signs of protracted recovery. As a result we have revised down our outlook for the country's freight transport sector over 2015, predicting positive but subdued growth across modes.

While the outlook for net exports has been bolstered slightly by weakening household consumption and the depreciation of the euro against the dollar in Q314 - which we expect to continue...

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Information Technology

France Information Technology

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BMI View: France is a mature IT market with strong demand for advanced products and solutions, as well as a leading ecosystem of local firms, particularly in the software and services segments. However the maturity of the market means growth prospects are limited, with the outlook weakened further by the outlook for a slow recovery from recession in the regional context of uncertainty. Of specific concern is the weak growth forecast for the majority of French citizens in terms of incomes, and the cuts announced to public sector IT spending. There are growth areas however; enterprise spending on cloud services including SaaS, IaaS and PaaS is expected to grow rapidly,...

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Infrastructure

France Infrastructure

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BMI View: Our outlook for the French infrastructure sector remains subdued in 2015. A weak domestic economic environment and ongoing policy and regulatory uncertainty are undermining investor confidence and we expect to see limited gains in terms of fixed capital formation. While progress is being made on some large-scale transport infrastructure projects, the project pipeline in the energy and utilities sector is uninspiring and the outlook for the residential sector remains bleak. Overall we expect to see construction industry value contract for the eighth consecutive year in 2015, decreasing by 0.8%, before returning to minimal growth in 2016.

Key Trends And Developments

  • The transport industry remains the strongest sector in France's construction market, with...

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Insurance

France Insurance

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BMI View France's insurance market is among the best developed in the world, with penetration and density both at extremely high levels. Both the life and non-life segments will witness further growth in premiums over our forecast period through to 2019. Life insurers have been raising capital and will continue to develop innovative and attractive products. Non-life insurers have pricing power, and will be able to increase rates, however, volumes across both markets are unlikely to grow much given the stagnation of the economy and weak business environment.

The strengths of France's insurance sector remain obvious. These include, in no particular order, economies of scale, powerful brands, multi-channel distribution, discipline in underwriting, access to capital and reinsurance markets and demonstrable ability to develop attractive...

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Medical Devices

France Medical Devices

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BMI Industry View : Although France continues to rank among the top five largest medical device markets in the world, growth rates are modest by global standards. The continuing drive to hold down costs and the more restrictive measures being implemented to regulate medical device expenditure in a similar manner to drug expenditure will continue to constrain spending on medical devices. Having implemented measures to curtail spending on reimbursable devices in the ambulatory sector, the authorities are starting to pay much greater attention to spending in the hospital sector through the PHARE hospital responsible purchasing...

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Metals

France Metals

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France's metals sector is set for an extended period of very modest but uninterrupted growth in terms of both output and consumption through to the end of our forecast period in 2018. As long as major producers in the sector hold back on investment, however, we will not see growth accelerating at a rate any faster than the broader European market. Within the metals industry, steel will continue to dominate the country's metals industry, aided by a turnaround in the fortunes of France's domestic autos industry in 2015. ArcelorMittal and Rio Tinto, the two largest producers in the country, are facing an increasingly hostile and competitive operating environment, with steel still cheap on a relative basis and aluminium being exported from China. We therefore do not expect France to return to pre-2008 rates of production or consumption before the end of our forecast period to 2018.  

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Oil & Gas

France Oil & Gas

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BMI View: Political debate and controversy surrounding shale gas has continued and as a result, the outlook for both upstream exploration and production remains weak. The latest developments in the downstream sector, including the conversion of one facility in to a biofuels complex, underscore the likelihood of further capacity reductions despite a recent improvement in margins.

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Headline Forecasts (France 2013-2019)
2013e 2014e 2015f 2016f

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Petrochemicals

France Petrochemicals

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Strong growth in French petrochemicals in 2014 and going into Q115, following a period of decline, is unlikely to be sustained throughout the year due to stagnating economic activity and meagre export growth. While the automotive sector is performing relatively well, other manufacturing sectors are weak, and vulnerable to external shocks, according to BMI's France Petrochemicals Report.

In Q115, chemicals output growth was reported at 3.3%, which far exceeded average European growth of 0.3%. It came after a year when organic chemistry rose 5.6%, which broke a period of decline in the output of basic chemicals, fertilisers, plastics and synthetic rubber. However, there are significant weaknesses in some segments. While plastic output grew 2.3% in 2014, rubber was down 4.1%. This trend continued into Q115 and the contribution of petrochemicals to overall chemicals growth is likely to diminish.

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Pharmaceuticals & Healthcare

France Pharmaceuticals & Healthcare

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BMI View: Improvements in leading high-frequency indicators for the French economy, including consumer confidence, will continue to pose upside risks to our pharmaceuticals and healthcare growth forecasts over a multi-quarter horizon. However, while domestic and eurozone improved growth readings will put France back on investors' radars, regulatory encumbrances affecting labour market costs will continue to weigh on the country's full potential, including the pharmaceutical sector. Meanwhile, an increase in the uptake of generic medicines and other cost-control efforts by the government will be combined with measures to improve and extend access to healthcare, sustaining demand and overall sector growth over the long term.

Headline Expenditure Projections

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Power

France Power

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BMI View: France's power market is very well developed and dominated by the energy giant EDF . As a mature market we do not expect to see significant growth in generation over the forecast period, though renewables are attracting investment making this a potential growth area. Policy uncertainty relating to the phasing out of nuclear power, which currently accounts for 75% of total generation, could cause further delays for the diversification of France's energy mix, particularly as the new energy bill faces considerable political opposition.

France's thermal generation shrunk by an estimated 1.1% year-on-year (y-o-y) in 2014 and is expected to remain flat in 2015. Non-hydro renewables is recording the strongest growth:...

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Real Estate

France Real Estate

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BMI View: Following strong growth in the Parisian office and retail sectors in 2014, we also expect the capital to bear the vast bulk of the commercial real estate's growth in 2015. This development can however not distract from the fact that beyond the city's borders, little growth and transactional activity is taking place, due to the difficult macroeconomic situation in the country.  

The French commercial real estate market has experienced some upwind over 2014. Especially - yet unsurprisingly - Paris has seen significant growth in its office market and some renewed demand in its retail sector. Overall demand and transactional activity outside the French capital, however, remained curtailed. The same goes for the industrial property sector which continues to suffer from a stagnating economic recovery and low export levels...

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Renewables

France Renewables

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BMI View: Having passed twice in the National Assembly, the energy transition bill - which intends to phase down nuclear power and increase the proportion of renewables in the power mix - signals the government's intention to prop up the French renewables sector. However, the Senate opposing and watering down this bill in order to protect a strategic nuclear sector questions whether Hollande can deliver on his promises. As such, we expect the direction of policy to remain opaque before any final legislation is passed, muting our forecasts for the French non-hydropower renewables industry.

We therefore retain our cautious approach to the Hollande administration's plans to boost reliance on renewable energy at the expense of nuclear power. Protracted investor...

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Retail

France Retail

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BMI View: While we expect a modest growth uptick in the French economy driven by increasingly confident consumers, we do not believe it can be sustained over a multi-year time frame. This poses threats to the wider retail sector's growth prospects, as we expect the French economy to be consigned to low growth, stubbornly high unemployment and gradually mounting debt stocks in both the public and private sectors over the next five or so years. This means that although household spending will continue to rise over the medium term, growth will remain unspectacular.

There are both upside and downside risks to our forecast scenario. To the upside, a sustained fall in oil prices has the potential to significantly boost consumer spending and also lower input costs for firms, which, combined with a weakening euro could also improve French retail sales to tourists. To the downside, a further...

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Telecommunications

France Telecommunications

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BMI View: France has four fully converged operators offering fixed and mobile services to customers in the market. As it becomes saturated, operators will look to expend their premium services offers, as a way to increase revenues by upselling them to their customer base. A short-term focus will be on lowering churn, which is helped by the increased penetration of quad-play customers, with investments into new advanced technologies such as LTE and fibre also of importance. Moving ahead, operators will be looking to add a series of connected devices to their high-end customers, such as connected homes or connected cars, as a way to retain and improve profitability where customer growth declines.

Key Data

Mobile subscriptions continue to increase in the market in 2014, up 1.6% year-on-year (y-o-y) to 78.675mn. However, lower growth reported in Q115...

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Tourism

France Tourism

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BMI View: Rising arrivals figures and increasing numbers of domestic tourists will provide a boost to the French tourism market between 2015 and 2019. However, the market will continue to run at two speeds, Paris and the regions, and small independent operators look set to lose out on increasing visitor numbers. This is likely to drive consolidation at the budget end of the market.

Arrivals will be boosted by the relatively weak euro, a range of infrastructure projects nearing completion, and an improvement in the economies of key source markets such as the United Kingdom. Growing visitor numbers from China in particular prove encouraging for the high-end hotel market in France. Improved stability in France's regulation of the tourism industry is also likely to provide a more reliable background for investment in coming years.

Outbound tourism is also set to rise...

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Water

France Water

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France's water sector has seen many positive changes in recent years, especially as the government has striven to attain the high standards of quality and practice laid down by the EU. Developments to the infrastructure and technology of the sector have resulted in an efficient and productive industry, which in turn is governed by strong and clear regulations. The improvements, however, are ongoing. With much work still needed and projects continuing to be initiated, the sector is currently very favourable for investors - a fact that is backed up by favourable legislature and an openness to outside input.

The increase in developments and construction projects throughout the water sector, has led to demand for an increased workforce, alongside the introduction of highly skilled tradespeople. To meet this demand the French government is encouraging investment from both French companies and foreign ones. With a surge in the quality of workers,...

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