Where is French industry?

French industry, a long love story, isn’t it? Between the glory and the tumults of its existence, this industry has undergone significant transformation over the years. However, this is not a simple problem since this subject has been at the center of political debates for a long time and does not create a consensus within our society. We will therefore try to take stock of current French industry.

1 – Introduction

A – Context and importance of the industry in France

According to INSEE , in 2022, the production value of the industry is 1,244 billion euros. Between 2021 and 2022, this production only increased by 0.5%. Other important data, exports are positive since they grew by 2.4%. However, imports increased by around 6%, in particular because of extractive industries, energy, water, waste management and depollution.

For the record, France was one of the first countries to experience the Industrial Revolution at the beginning of the 19th century . It first stood out in mining and metallurgy , then developed in other sectors post-World War II, including aeronautics and nuclear power . But since the 1980s, the country has experienced a phenomenon of deindustrialization caused by the tertiaryization of its economy and the financial advantages of using more affordable labor in developing countries. This deindustrialization has had the effect of distancing areas of production from places of consumption. The environmental consequences are strong because producing countries do not have the same regulatory constraints. There is also the climate impact linked to the distances traveled by finished products and that caused by the transport of raw materials.

Even if the weight of industry in the economy has been halved since 1970 , this sector still represents nearly 3 million direct jobs in France. Note that French industry has a share of its gross domestic product (GDP) lower than the European average in 2021 . It was 16.8%, or 6.2 points below the average for other European Union countries. This average is increased by countries such as Ireland (40%), Norway (36%) and Germany (27%).

France needs its industry for various reasons. To do this, you need to understand its role in the economy to realize it. Industry combines factors of production to create material goods. This requires labor, thus promoting job creation.

B – Future prospects

If there is one thing that will characterize the industry for years to come, it is undoubtedly digital. Many people talk about industry 4.0 . As proof, 70% of manufacturers make the modernization of their tools an important objective, even a priority according to the CCI . For example, we can boast of being the most automated country in the automobile sector. Indeed, in May 2022, French companies had 148 robots per 1,000 employees on average compared to the United States (138) and Italy (120). These figures are even stronger when we know that we had 154 robots for 10,000 employees in 2018.

France still has a way to go because we are today ranked 15th out of the 28 EU states in terms of digital competitiveness and 11th in terms of usage in businesses. Late awareness has pushed back the transformation towards the industry of the future.

Concretely, the industry is probably moving towards 3 classes of tools (nothing is set in stone obviously):

  • AI and automation : everything that brings together robotization and robotic assistants (exoskeletons for example).
  • Digital : virtual visualization of objects (design, monitor, maintain), augmented reality and edge computing (network edge computing) and additive manufacturing (including 3D printer).
  • Networks : the blockchain which allows data to be stored and transmitted in a transparent and secure manner between different production sites, the IoD (internet of things) allowing communication between “physical” goods and their digital existences (an operator can by example controlling a tractor on a construction site from a remote control center) finally non-disruptive control via sensors (anticipating breakdowns for example).
READ:  Earn 500€ per month with internet, results after 4 months

We are thus witnessing a crossroads in industrial history since the processes are in full swing. A multitude of opportunities that France must seize to bounce back in this sector .

2 – Recent developments in French industry

A – Effects of Covid-19 and recovery measures

You are surely aware that the health crisis linked to Covid-19 has left its mark on the global economy, France and its industry have undeniably suffered.

In 2020, euro zone GDP fell by 6.6%, sparing no sector but still some suffered more losses such as catering, transport, accommodation and commerce. France is more affected since its GDP decreases by around 8%. During this crisis, individuals abandoned health services and restrictions, which only accentuated this trend.

Business investment was naturally lower (9%) but it could have been worse without public support. On the household side, savings increased to reach more than 202 billion euros, or 90 billion more than in 2019. This is simply explained by the uncertainty of households regarding a pandemic worldwide.

The manufacturing industry recorded a decline of 12% during this period, with certain sectors being more or less affected, such as automobile manufacturing (-32%) and the aeronautics sector (-30%). Others are doing slightly better (quite logically), health-related activities are increasing a little and the agri-food industry is holding up given household consumption (-2.3%).

During this period, the French external deficit doubled because France lost market share. For example, it imported 5 billion euros worth of surgical masks in order to meet exponential demand, particularly in public administrations (33%).

This period therefore caused turmoil for the entire economy, but what recovery measures made it possible to save the furniture?

At the end of March 2021, nearly 201 billion euros were mobilized to help French companies, this represents 9% of national GDP.

Among the most important measures, there was first of all an explosion in partial unemployment to maintain as many jobs as possible despite the drop in activity. Employment has also remained relatively stable. Then, the State-guaranteed loan for companies with fewer than 50 employees is created. And for SMEs which cannot benefit from the PGE, a refundable advance is put in place.

These are just brief overviews of the range of aid offered by the State during this unprecedented period. These measures made it possible to limit the damage to save as many companies as possible; the General Directorate of the Treasury estimates that 40,000 bankruptcies were avoided, or 45% less than a year earlier. However, the question of catching up still looms because these measures can delay business failures rather than saving them. To date, this catch-up has still not taken place.

B – France, the cradle of foreign investments

According to the EY attractiveness barometer, France will remain in first place in Europe in 2023 in terms of the number of projects and jobs announced by foreign investors in Europe.

The famous Audit and Consulting firm nevertheless specifies that “the total number of international establishments and extensions recorded in 44 European countries increased by only 1% last year. More seriously, employment supported by these companies fell by 16%.”

However, France has nothing to be ashamed of vis-à-vis its two main competitors (United Kingdom and Germany). In fact, the projects carried out in our territory increased by 1% (with 1,259 projects) compared to 929 for Germany (-6%) and 832 for the United Kingdom (-1%). French industry attracts more foreign investment since France is far ahead of its two pursuers with its 547 projects, which is twice as many as Turkey and five times more than Great Britain.

This can be explained by different indicators, France welcomes numerous investments in R&D (+8% in 2022). Ile-De-France is attracting more and more people, this area is also placed for the first time on the highest step of the podium on an EY barometer. The range of skills that our country possesses makes it possible to attract international investment. Finally, carbon-free energy (mainly favored by nuclear power currently operating at only 54% of its maximum capacities) is seen as our main industrial asset by 49% of the managers surveyed.

READ:  Getting started in e-commerce with little financial means
Where is French industry?

3 – Future challenges for the industry

A – Maintain competitiveness on a global scale

The industry is a major player in an increasingly competitive globalized economic landscape. Currently, emerging countries are gaining momentum, technological developments and environmental factors are all factors that make competition more important. France must protect and help its industry to regain its former strength because there are many changes.

French manufacturers chose to relocate their production in the 1980s to make savings by benefiting from a lower workforce in order to gain price competitiveness. Today, knowledge has been exported to these countries (let us cite China) and the differentiating factors are gradually fading. The automotive sector is already paying the price since Chinese brands or brands bought by Chinese groups are grabbing market share in Europe. Thus, it is no longer enough to lower production costs to maintain a competitive industry. The difference will be made through innovation; we must adapt to changes by offering new, high-quality solutions. Made in France is losing its splendor, yet it is an undeniable strength of our industry because “made French” is well seen in France and abroad. Click here to read our article on this subject.

We have seen that France attracts more FDI in R&D and this is a good thing because research allows the creation of new products, technological improvement and the need to stay up to date.

Training enables skills development. The workforce must respond to changing market needs. A highly skilled and adaptable workforce is an essential asset to meet the challenges of global competition.

Global competition forces French industry to surpass itself to overcome present and future challenges .

B – Ecological transition

The climate emergency and the growing demand for sustainable solutions are still forcing French industrial companies to adapt their practices to ensure a more respectful approach. Indeed, France must build a competitive green industry to guarantee a successful ecological transition.

Production methods are evolving and global competition is becoming fierce. Guaranteeing a good transition will not delay France in its reindustrialization. It is even necessary to do so because it would be dangerous to once again experience a phenomenon of deindustrialization.

There are numerous areas of work:

  • The circular economy : long-term thinking to optimize, maintain and/or reuse materials for as long as possible (think carefully about products via eco-design, make them repairable at a time when planned obsolescence is required , to recycle…)
  • The development of green energies and a reduction in fossil fuels : reducing CO2 emissions from the sector without negatively impacting activity to ensure a viable ecological and economic transition.
  • The use of bio-sourced solutions during production : preserving the soil, air and water by ensuring releases that are potentially harmful to the environment.
  • Optimization of energy consumption : it seems obvious that reducing energy consumption can be implemented easily but this sometimes requires large financial investments. However, we need to think about consumption across the entire value chain, from design to final use of the product.

These actions constitute the current or future daily life of companies in the industrial sector. We can summarize 6 issues for businesses , the decarbonization of production, energy consumption, air pollution, waste and raw materials management and then soil pollution.

Obviously not all companies are in the same boat given their activities and their respective size. They will have to integrate complementary resources without compromising fundamental business actions.

Where is French industry?

C – Lack of labor

More jobs than people available to fill them, this is a beautiful paradox, especially since the unemployment rate is at 7.1% in the first quarter of 2023. This may seem trivial, but there is a shortage of labor. work creates several problems. First of all, there is an increase in salaries because employees have the choice of their company. Worse yet, this increase may cause prices to increase to cover the cost of additional payroll.

READ:  Collection of your debts: these good reflexes to take

In the fourth quarter of 2022, France had a job vacancy rate of 2.4%, which is 0.1 points more than the same period the previous year and 1.1 points more than ‘in 2020. According to the CPME , 84% of companies looking to recruit encounter recruitment difficulties.

Industry is therefore not the only one having difficulty recruiting. So what are its own factors that make its task difficult? The first is perhaps the poor image of the industry among the workforce because many believe that these jobs are hard and involve long hours of work for inadequate pay . This is not helped by young people’s search for meaning in their work, which is an important criterion today for nearly 32% of them. In addition, career development is perceived as insufficient, which also influences the decline in the labor supply.

Other factors such as flexibility , lack of stability (here we can take the example of the global shortage of semiconductors which caused a drop in production) or even workplace safety and mental health .

D – Regulations, a barrier for businesses

France is a regulated country and this does not escape companies who must comply with rules, standards and procedures which can slow down processes, increase costs and reduce flexibility.

Innovation can, for example, be slowed down by regulations that do not take into account new technologies or that do not adapt quickly enough to market developments. This can therefore slow down the growth potential and the development of new disruptive solutions.

4 – Determining sectors

The industry is made up of a multitude of sectors, each contributing to the growth of the French economy and competitiveness on a global scale. We naturally cannot study all industrial sectors, which is why we will only detail 4 branches which play a major role in the French economic landscape, particularly due to their innovation.

A – Automotive

The automotive sector is undeniably affected by the sustainable shift in the global economy. Electrification and all other sustainable solutions are changing the landscape of a historic sector. French manufacturers have invested and continue to invest massively in research into batteries, hydrogen and other alternatives with a lower environmental impact.

Now, let’s talk a little about numbers. The French automobile industry has regained its momentum in 2022 and 2023 with growth of 5.8% and 11.5% respectively. The shortage of semiconductors is less and less present, which limits the drop in production since it has increased by 6%. However, the latter still remains well below the level observed in 2019 of 20%. In 2023, the dynamic remains just as positive, with an estimated annual increase of 11.5%, boosted by the production of the new Renault Mégane and the new Peugeot 308 on national territory. In 2022, the share of electric and hybrid vehicles in production was 22% to reach 459,212 registrations. The market shares of these segments were 11% two years ago.

The French market is constrained by strong environmental objectives, in particular with the Euro 7 Standard by 2025 for cars (2027 for trucks). Since the early 1990s, Europe has established standards limiting polluting emissions from new vehicles in order to improve air quality in cities and ultimately public health. These standards have been updated approximately every five years to reduce the levels of carbon monoxide, fine particles and even nitrogen oxides generated by vehicles in circulation. To speak of action, these standards contributed to the installation of particle filters on vehicles. Concretely, this new standard will lower the tolerated emissions of diesel vehicles (and not gasoline) from 80 mg/km to 60 mg/km. In addition, the conformity of cars and vans will have to be checked up to 200,000 kilometers and 10 years of age (this is twice as high as the old rule). From now on, particles emitted by brakes (7 mg/km) and tires are subject to regulation in addition to the combustion of thermal engines. But this standard is not unanimous.

The Euro 7 standard is potentially counterproductive in its current form

Lucas de Meo, Managing Director of the Renault group

READ:  Why invest in watches?

In 2050, the sector must achieve total carbon neutrality. The European Union intends to do this by banning thermal vehicles from the year 2035 to achieve this. This industry is changing and France has understood this by investing massively in battery mega-factories to support the sustainable mobility of tomorrow.

B – Aeronautics

Aeronautics is a sector bringing together the design, manufacturing and maintenance of civil and military aircraft. It is a sector that is singled out for its carbon footprint, although air transport represents “only” 3% of greenhouse gas emissions. However, he intends to evolve so that this industry is more responsible.

The sector is today constrained by significant environmental standards and increased foreign competition. If France wishes to maintain its global position, it is necessary to maintain high technological mastery and improve the competitiveness of national players. Greenhouse gas reduction targets will create profound changes in the design and structure of aircraft. In addition, technological innovation will also transform this landscape, we can cite predictive maintenance for example. France must therefore invest massively to adopt the most innovative and efficient technologies.

To do this, the sector has already started its transition. The use of biofuels, which saves money, is becoming more widespread, although it is three times more expensive than kerosene. European regulations currently impose a minimum 1% biofuel rate on each flight; they want to increase this ceiling to 6% in 2030.

French players in the sector are working to propose new concepts for the future. Hydrogen planes are being heavily studied by Airbus, which wishes to introduce an aircraft of this type from 2035. Others are moving towards electric technologies such as Aura Aero, particularly for journeys of less than 150 km. Current models are much more durable thanks to the latest generation engines and lighter fuselages. Innovations are coming forward to limit the carbon footprint of an essential but not neutral industry.

This industry is in full swing like many others and the levers for action are extremely numerous, airports, fuels, engines, fuselages, sensors… Every innovation counts. The sector is essential for the French economy since it corresponds to 12% of exports. Aeronautics and space are industries with a strong export surplus in an overall context of trade deficit.

C – Energies (in particular green energies)

The energy sector is omnipresent in the industrial sector because it supplies all economic agents. This sector is undergoing a profound transformation, guided by the objective of reducing greenhouse gas emissions and promoting environmental sustainability. The transition to renewable energy is therefore at the heart of the future challenges of this industry.

To achieve its ambitions by 2050, the sector is banking on different solutions such as onshore and offshore wind power, hydropower as well as solar energy (TotalEnergies has also inaugurated one of the largest solar power plants in France in December 2022 in Fos-Sur-Mer). Engie, a key player in this transition, plans to invest between 13 and 14 billion euros in renewable energies. Nuclear remains an essential “green” energy to achieve our objectives and maintain an ounce of our energy sovereignty since it corresponds to 43% of the production capacity of the French electricity fleet in 2022 and nearly 63% of production that same year. Note that the sector was, however, under pressure during the winter of 2022-2023 and that availability was not total.

READ:  Gilles Bouleau's salary: so how much?

Exceptionally and for the first time in 40 years, France presented a trade deficit in
in terms of electricity in 2022. Indeed, France has massively imported electricity from Germany/Benelux, Spain and the United Kingdom but the trade balance is nevertheless positive with Switzerland and Italy.

The energy industry is the one that will support the transition of the majority of other industries and of society which is moving towards renewables. However, volume consumption is being undermined by two factors. The first being the energy plan presented in 2022 by the government to achieve 10% less energy consumption than in 2019, then the second factor is the increase in the price of electricity. Stakeholders will therefore have to ensure this to ensure their growth and continue their investments in green energies.

Where is French industry?

D – Technological innovations (including Artificial Intelligence)

Technological innovation characterizes industry 4.0. We previously presented the 3 typical points of technologies that will shape the industry of tomorrow: AI, digital and networks. These technologies will guide how businesses operate and how they create value. Industrialized countries are constantly equipping themselves with better technological structures to stay in line with the most efficient industries, obviously France is doing so and will be part of it. This new shift is indeed a strong means of differentiation to the extent that new cards appear. Strategies must undeniably move towards this approach so that industrial companies (or almost all) do not disappear.

Industry 4.0 aims to be more efficient thanks to digital technology. Data collection makes it possible to optimize and obtain watchmaking precision on production lines. Some companies are rushing to offer support to businesses, like Siemens, which summarizes the digital transformation in detail in this article.

We are not going to rehash our comments here because future perspectives are obviously focused on digital and technological innovation in this sector. However, it is important to emphasize this because change is happening now. Whether for industrial or commercial companies, associations, administrations, non-governmental organizations or all of us as individuals, we must realize the importance of updating ourselves to maintain global competitiveness. The United States is a step ahead of the majority of these innovations and companies active in conquering these technologies (I can cite GAFAM but there are many others, notably Nvidia which is increasingly gaining strength in recent years. years, 128% growth on the stock market just that!).

There is a train here not to be missed, France must succeed in adding a wagon to this TGV which will not stop to wait for it.

5 – Aid (excluding Covid-19)

A – Support for businesses and R&D

To reward companies that actively participate in the development of new solutions, the State offers several aid schemes, which can be tax, social or financial.

  • Research Tax Credit (CIR) : the CIR aims to encourage companies to engage in research and development (R&D) activities. It is a tax measure that allows part of their R&D expenses to be deducted from their corporate tax. This credit is accessible to all industrial, commercial and agricultural companies whatever their form and size provided that they are taxed according to their actual regime or exempt from taxes (including JEI).
  • Innovation tax credit (CII for SMEs) : the CII is a tax measure for SMEs which can obtain a tax credit of 30% of the expenses necessary for the design of prototypes or pilot installations of new products . Legally, the CII is called “innovation expenses eligible for tax credit”, an expression sometimes used generically.
  • Young Innovative Company (JEI) : a young company that invests in innovation has the status of Young Innovative Company or Young University Company, which allows it to benefit from tax and social security exemptions. These are subject to specific conditions .
  • BPI France : the French Public Investment Bank allows companies with expenses eligible for the Innovation Loan to strengthen their cash flow to facilitate the financing of intangible expenses necessary for the industrialization and marketing of new innovations. This loan is supported by the Pan-European Guarantee Fund (EIB) and implemented by the European Investment Fund (EIF) with the financial support of the Member States contributing to this guarantee fund.
  • Incubators : the mission of incubators is to welcome and support innovative business creation projects. These support structures offer essential services to get your project off to a good start and develop. There are several types of incubators: public, private, some belong to companies, others to Grandes Ecoles or even to local authorities and the European Center for Business and Innovation. Thus, industrial or other projects can benefit from a range of assistance (training, networking, equipment, etc.).
  • French Tech : the famous French start-up movement certifies, accelerates the growth of start-ups and offers international visibility in the best case. For industry, the French Tech Mission supports industrial start-ups via two levers: the industrial start-up window and a specific support offer dedicated to start-ups winning the “First Factory” call for projects. Here is the strategy implemented here.
  • etc.
READ:  Blogging challenge #2

There is a multitude of possible help for all types of businesses, government sites and other sites are there to provide you with all the useful information.

B – Training to guarantee skills

We were talking earlier about the lack of labor currently experienced by the industry and more broadly by companies seeking to recruit in France.

For example, EDF was forced to recruit North American welders due to lack of manpower to repair six nuclear reactors affected by corrosion. France lacks specialized welders. Concern is growing because the lack is omnipresent. It is for this reason that four nuclear players (EDF, Orano, CMN and Naval Group) came together to create a high school of welders to meet needs. “There is an emergency” declared David Le Hir, director of the Flamanville 1 and 2 power plant, and president of Hefais. This example illustrates a cruel lack of qualified workers in the industry.

Training, the miracle solution?

We can see that players in the industrial sector choose to create their own training to respond to their recruitment issues. The luxury sector is also a supporter of these practices since people without initial skills in the field can benefit from training in leather goods with Hermès or Louis Vuitton, for example.

However, training is not only about finding a job, it is also about keeping up with developments. In 2022, 68% of employees felt they needed training in a new profession or to stay up to date in the one they occupy according to Empowill.

Training is also undergoing major changes linked to digitalization. Apprenticeship is one of the preferred training methods in the case of industry. However, a new training concept could well become one of the flagship formats in the future. This is blended learning. This involves taking face-to-face and distance learning courses. It then combines the best of both worlds, retaining practice on one side and theory on the other with greater flexibility.

The answers to the recruitment problems are emerging: salaries are higher, working conditions are improved, internal promotion is real, training makes it possible to fill the skills gap, etc. but this does not seem to be enough. The methods appear there but the positions are still vacant…

6 – Conclusion

Overall, we are observing French industry at a decisive point because technological innovations are completely disrupting current practices. The industry is on the verge of its fourth generation. Some will stand out better than others. Let us hope that the various challenges, whether geopolitical or linked to recruitment issues, do not undermine an industry which faces many challenges.