France is now the 4th country in Europe by number of infected people, as of yesterday, there are 19,856 cases and 860 fatalities. On the 16th of March, the French President, Mr Emmanuel Macron, highlighted the seriousness of the situation by declaring “we are at war (against the Corona virus)”. Since the 17th of March, France is officially in lockdown, most non-essential commercial activities have been banned and strict rules have been issued on all outside activity. The lockdown is meant to last for two weeks but it will most likely be extended and rules on outside activity are expected to be tightened.
The French government has already revised its growth forecasts from 1.3% to -1% for this year and the deficit is expected to reach 3.9% of GDP. These numbers will likely evolve over the forthcoming weeks, as there will be a clearer picture of the damage caused by the Corona pandemic on the economy.
As in other countries, some sectors are going to be deeply affected by this situation.
The first that come to mind, looking at all the empty Parisian streets, are the tourism & hospitality and retail sectors. These sectors have already suffered over recent years and therefore, despite France being the most visited country in the world with 89M annual visitors and tourism representing 8% of the GDP, this could be the last straw for many smaller players in the industry.
The automotive sector was already facing an unprecedented crisis in Europe (in parallel to its radical transformation) and the main French actors have not been spared. Renault has taken the decision to temporarily close almost all their sites in Europe – of which 12 in France (as well as in Morocco, Argentina and Brazil). Meanwhile, PSA (owner of Peugeot, Citroën, Opel, Vauxhall and DS brands) followed the same path and closed all its sites since the 16 March and at least until the 27 March.
Last but not least, the aviation & aerospace sectors, with more than 900M people confined in over 35 countries and the border closures, the iconic French flag carrier, Air France, is planning to reduce its activity by 90% for at least two months. Guillaume Faury, CEO of Airbus, highlighted that this crisis is very different from the one following the terrorist attacks in 2001 or the financial crisis in 2008, as it affects all continents simultaneously, making it very difficult to balance their loss in one geographical area with another. That said, the slow recovery of China and pick up of business activity is giving the sector a glimmer of hope.
What the Government is doing
The government recently launched an action plan (worth 45Bn euros) to support and assist businesses impacted by the coronavirus pandemic.
Compared to 2008, a major difference is the emphasis put on furlough: the Government has enabled expedited procedures for employers to facilitate it and has slightly increased the hourly employment allowance.
These support measures may be revised according to the evolution of the epidemic in the coming weeks.
- Tax measures: direct tax rebates, acceleration of VAT & tax credits reimbursement, etc.
- Financing: support from the State, the central bank Banque de France and BPIFRANCE (public French investment bank) to guarantee cash loans and negotiate a rescheduling of bank credits, creation of a fund of 300Bn euros to guarantee bank cash lines, covering up to 100% of the salary of employees in furlough, creation of a solidarity fund for small & micro-entrepreneurs (1,500 euros each), temporary suspension of bills (water, gas, rent, electricity) etc.
- Establishment of dedicated contacts and specific sources of information: creation of dedicated information pages on the websites of the Ministry of Economy & Finance as well as of the Ministry of Labour, appointment of a dedicated contact point in each regional Chamber of Commerce, information support to French companies abroad through Business France (national investment & trade promotion agency) offices around the world.
Over the coming days and weeks, we will be sharing insights from across our global markets as developments progress, on our latest page and on social.
We will also be running a regular audio broadcast of market and insight updated over the coming weeks to keep our followers up to speeds on developments. To register your interest please click HERE and we will ensure you are notified.