France most attractive European country for foreign investment again, says EY

For the fifth consecutive year, France has retained the title of most attractive European country for foreign investment projects, according to an annual study published by consulting firm EY a few days ahead of the Choose France summit.

Last year, foreign companies opted for France ahead of the UK and Germany, setting up or continuing with 1,194 foreign direct investment (FDI) projects in the country. The UK ranked second with 985 projects, and Germany third with 733, as shown by the EY study published on Thursday.

The total number of FDI projects in France fell by 5% compared to the previous year, but they generated 39,773 new jobs, 4% more than in 2022.
“Yes, the French economy is strong. Yes, it is attractive. And no, this is no coincidence,” said the French Minister of the Economy Bruno Le Maire, in a statement sent to the AFP agency.

“The stability of our supply-side policies is unanimously welcomed by investors: we will not deviate from them,” he continued, citing several upcoming reforms focused on unemployment insurance and simplifying business practices.

In recent years, the French government has prioritised the country’s attractiveness to investors, with the underlying aim of reindustrialising France in the wake of the pandemic and the invasion of Ukraine, and of attracting financial firms post-Brexit, through labour market and fiscal reforms.

The focus on reindustrialisation seems to be paying off. EY reported that 530 projects to expand or set up new factories were announced last year in France, far more than in its European competitors, and more than double the projects announced in 2015.

Reindustrialisation

“We are daring to speak of reindustrialisation. It’s true,” said Marc Lhermitte, one of the EY study’s authors, speaking to AFP. The study showed that industrial projects in France are also fostering the creation of more than 20,000 new jobs, again putting France top of the relevant European league table.

“A few years ago, everyone knew there was a significant gap in terms of image and attractiveness for industrial projects between Germany and France, but in 2023, industrial investment was six times higher in France” than in Germany, said Franck Riester, the French minister in charge of foreign trade, speaking to journalists.

Among the French assets recognised by foreign investors, workforce quality and the quality of the country’s legal and regulatory environment rank highest, according to the EY study. The study was published a few days ahead of the Choose France summit, scheduled on May 13, a major annual event during which many global business leaders are invited to Paris to present some of their investment projects.

At the opposite end of the attractiveness scale, energy prices and cost competitiveness are regarded instead as stumbling blocks.

Despite leading in terms of number of projects, France lagged, as it did the previous year, in terms of number of jobs created on average per project. They were 35, as opposed to 49 in Germany, 61 in the UK and 299 in Spain, which led this particular ranking.

One of the reasons for this, noted EY, is that France is chiefly a country where investors are carrying out site extensions, rather than starting projects from scratch. Two thirds of the projects announced in France are in fact extensions, compared to only one quarter in the UK and Germany. Greater London is leading the Ile-de-France region (which includes Paris) as a base for company headquarters.

The French government is keen to put a positive spin on these figures: “In the case of many industrial sites, investors are opting to enlarge, modernise, and decarbonise,” said a presidential source.

The EY study was published a month after a survey by consulting firm Kearney, which ranked France behind the UK and Germany in Europe, after interviewing 516 business executives in 30 countries about their investment plans over the next three years.

The EY study also reported a sharp decline in US investment in Europe, attributed “undoubtedly” to the US Inflation Reduction Act, a major plan introduced by US President Joe Biden that subsidises corporate projects centred on climate transition.