Our comprehensive assessment of France's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect France, as well as the latest industry developments that could impact France's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in France before your competitors.
France Country Risk
While the rest of the eurozone is showing early signs of recovery, the French economy continues to lag behind the region. While the improving regional economic outlook may provide some limited upside potential, this might not be sufficient to drive a recovery in French manufacturing unless the country first addresses its outstanding competitiveness issues.
While we are likely to see a gradual increase in positive rhetoric towards structural reforms, Hollande is unlikely to become an ambitious reformer of the French model. While we expect some reformers will take baby steps in the right direction, the ability of Hollande to implement sweeping reforms will be restrained by divisions within his own party and core support base, and resistance from the proliferation of special interest groups which will make unilateral reform a troublesome and compromised process....
France Industry Coverage (20)
BMI View: We believe the grain s sector in France will continue to outperform other agribusiness segments in terms of production growth. This will be reinforced by the ongoing reforms of Common Agricultural Policy subsidies , Â which are likely to have more of an effect on dairy and livestock farmers than grain farmers.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2010-2018)|
BMI View: Â W e forecast a 1% drop in 2014 vehicle sales due to expected weakness in both the passenger car and commercial vehicle segments.
The positive developments seen in France's passenger car and commercial vehicle segments will not continue over the rest of 2014 with sales growth worsening in 2015. Deteriorating private consumption and falling business investment will drag on both the passenger car and commercial vehicle segments.
We believe that recent growth seen in both the passenger car and light commercial vehicle (LCV) segments will not continue due to the continued stagnation of the French economy. Passenger car sales will be limited by weak household consumption made worse by increasing unemployment. Demand for commercial vehicles will be weighed down as business...
Defence & Security
France Defence & Security
BMI View: Â 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...
Food & Drink
France Food & Drink
BMI View: Â France's economy is still lagging substantially behind regional peers. The outlook for French households did not improve significantly over Q114, however, with unemployment continuing its steady ascent to record highs. While consumer confidence has risen in recent readings, we see few fundamental factors supporting this growing optimism. Food retail sales are now down, indicating that momentum supporting the sector has waned. Still, 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 relatively steady over the coming years.
France Freight Transport
BMI View: Â The French freight transport sector remains dogged by structural issues in its labour market and the uncompetitive nature in export s . Meanwhile , the French economy continues to lag behind the rest of the eurozone despite its regional peers showing signs of protracted recovery. A s a result we have revised down our outlook for the country's freight transport sector over 2015, p redicting 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...
France Information Technology
BMI View: Â W e downgraded the outlook for the French IT market in Q4 2014 due to a deterioration in the economic outlook. We were already forecasting slow medium term growth as a result of high penetration of products and solutions and cuts to public spending , and France is now expected to be a regional underperformer . However, France will continue to be a leading global IT market for due to its scale and the fact it is home to leading IT services providers and a growing cybersecurity ecosystem. Meanwhile, enterprise spending on cloud services including S oftware- a s- a - S ...
BMI View :Â We have further downgraded our construction industry real growth forecast for France in 2014 to -4.2% on the back of weaker than expected industry data for H114 and overall economic underperformance. As such, we expect France's construction industry contraction to continue over 2015, making it eight years of consecutive negative growth.
Key Trends And Developments
The outlook for France's residential sector is pretty bleak. We believe the housing market is not particularly attractive to investors, implying that investment flows will keep growth at a low level. This is in addition to a banking sector in bad shape, tightening borrowing conditions, and the declining purchasing power of French households.
Despite the weak performance in France's...
BMI View : Through the forecast period, as in 2014, business will be (highly) profitable, but slowly growing, for France's world class insurance compan ies .
As of late 2014, the newsflow from France's insurance sector continues to highlight the strengths of the leading companies. In no particular order, these strengths include: absolute scale and the economies that are possible; established brands; clear distribution strategies (which often use multiple channels); access to all the capital that they need; underwriting discipline and; capacity to develop innovative and attractive products.
In the life segment, some of the companies have leveraged these advantages to achieve strong growth in unit-linked products. Across the segment as a whole, though, sales of other products have fallen, thanks in part to planned realignment of...
France Medical Devices
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 constr ain spending on medical devices . Â 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 ...
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.Â 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. Â...
Oil & Gas
France Oil & Gas
BMI View: Low-levels of upstream and investment and a high import burden will persist in France absent a reversal of a government opposition to shale gas exploration. Some senior officials and powerful business interests have expressed support for shale gas exploration, but the issues remains politically contentious. In the downstream sector, further refinery closures are likely given market conditions that will see margins remain weak over the course of our forecast period. Â
The French petrochemicals industry began a slow recovery in 2014, but BMI's latest France Petrochemicals Report does not envisage a return to pre-recession production volumes following a series of plant closures throughout the value chain.
The shut-down of facilities has not yet been completed with Total's planned closure of ethylene and propylene operations at its petrochemicals plant in Carling planned in 2014. This will remove 400,000tpa of ethylene capacity in 2015. Total has announced plans to spend EUR160mn on polymer production upgrades at the site before 2016 with the creation of a new thermoplastics unit to produce automotive plastics, a capacity expansion for polystyrene (PS) production, and upgrades to the polyethyleneÂ (PE) production unit to increase yields of advanced plastics.
Other French producers are likely to shift from high-volume basic chemicals and...
Pharmaceuticals & Healthcare
France Pharmaceuticals & Healthcare
BMI View: Â D espite the French government partial ly abandoning fiscal deficit targets in Â its 2015 budget , cost - containment measures will continue to weigh on the pharmaceuticals and healthcare sector for Â the foreseeable future . The government 's strategy of emphasis ing preventive care and improved access to doctors will likely avoid long-term costs by reducing the burden or risks...
BMI View: Â On July 30 the French cabinet passed the first substantial energy bill. The long awaited act is the first concrete step to fulfil the electoral promises by President Francois Hollande to reduce the share of nuclear energy in the electricity mix from the current 75% to 50% by 2025. The bill confirms the proposal presented in June by Energy and Environment Minister SÃ©gol Ã¨ne Royal to cap nuclear energy at 63.2GW , the current levels. The bill then primarily focuses on boosting energy efficiency and energy sufficiency. H owever , it fails to address the question of returns of renewable energy. While it will contribute to a slowdown, or even reduction, in electricity demand, without actively addressing growth in renewable...
France Real Estate
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 . Â
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...
BMI View: Â While we are maintaining our forecasts for the non-hydropower renewable energy sector in France this quarter, the passing of the long-awaited energy bill at the end of July 2014 marks an important step forward towards the reduction of the country's reliance on nuclear energy sources over the medium to long Â term. However, we note that the proposed policy mechanisms are mainly aimed at the reduction of electricity demand and greater energy sufficiency and do not address the question of returns for renewable energy. We believe this may lead to an overall increase of nuclear energy in France's electricity...
BMI View: Â Numericable consummated its acquisition of mobile operator SFR in late December 2014, putting the French converged services market on a new path for growth. By combining SFR's mobile and wireline broadband businesses with its core pay-TV and broadband operations, and rounding out the offering with the purchase of MVNO Virgin Mobile France , the enlarged entity will put increased pressure on Orange , Bouygues Telecom and Iliad / Free . Having had an audacious take-over offer for T-Mobile US spurned in the summer, Iliad could now turn its attention on Bouygues Telecom, which is struggling for...
Â BMI View: France ' s mature tourism market means there is less potential for new market entrants, but the enduring popularity of the country and strong political support of the government towards the tourism industry means there is still a strong return to be had for established competitor .
The geographical location encourages large number of European tourists (the UK are the single largest contributor to arrival numbers) and the chic, stylish reputation of Paris encourages a large (and growing) number of middle class tourists from BRIC countries. For example, we predict a 31% increase in Russians visiting France from 2015-2018, with Chinese arrivals increasing by 19% in the same period.
Partly driven by this, there has been an increase in high end acquisitions and renovations, with a number of luxury...
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,...