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 (20)

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, we forecast a 1.4% drop in vehicle sales due to expected weakness in both the passenger car and commercial vehicle (CV) segments. In 2014, total vehicle sales increased 0.2%, to 2,212,571 units, due to modest growth in the passenger car and CV segments. However, in line with our core view, the sales uptick in the first half of the year subsided, and the market entered contractionary territory in the latter months of the year as broader economic malaise weighed on autos sales.

Indeed, 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 investment continues to decline; with heavy trucks experiencing the hardest falls owing to deteriorating...

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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

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 : In the short term, the key driver of total premiums will be the weakness of the EUR relative to the USD. Recent data from the FFSA, the insurers' trade association, confirms that both the life and the non-life segment are growing in local currency terms. We expect that they will continue to do so. The leading life insurance companies will take advantage of their recent - and very large - capital raisings to develop and distribute attractive new products, including the recently introduced Euro-growth funds. In the non-life segment, the companies will continue to increase prices (and control costs): however, the stagnation of the economy means that the non-life companies are unlikely to enjoy much volume growth.

The formidable strengths of France's insurance sector remain obvious. In no particular order, these include economies of scale, powerful brands, multi-channel...

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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: The outlook for upstream activity remains weak but a reversal of France's ban on hydraulic fracturing could facilitate investment in monetising the country's sizeable shale gas potential. Although we have not forecasted further cuts in downstream capacity, we note that the sector remains vulnerable amid falling demand and competitive pressures.

Headline Forecasts (France 2013-2019)
2013 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: France will remain among the largest pharmaceutical markets worldwide in the coming years, especially due to a large and aging population, as well as high per capita spending levels on medicines. However, several cost-containment measures will continue to exert downward pressure on market growth over a multi-year horizon. On the upside, current macroeconomic trends, including low oil and food prices, should be net positive for household consumption in France, posing upside risks to market forecasts in the medium- and long-term.

Headline Expenditure Projections

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Power

France Power

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BMI View: On July 30 2014, 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 Segolene Royal to cap nuclear energy at 63.2GW - the current levels. The bill then primarily focuses on boosting energy efficiency and energy sufficiency. However, the French government's ability to deliver its plan to cut reliance on domestic nuclear capacity has been constantly questioned by our analysis. Our view has b...

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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: While we are maintaining our forecasts for the non-hydropower renewable energy sector in France for 2015, the passing of the long-awaited energy bill at the end of July 2014 marked an important step forward towards the reduction of the country's reliance on nuclear energy sources over the medium to long 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 mix.

This quarter, we are maintaining our 2015 forecasts for growth in French non-hydropower renewable energy...

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Telecommunications

France Telecommunications

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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