taxes, insufficient investment and a positioning that is sometimes too exposed to price-based competition. Catching up will mainly depend on the country’s ability to modernise its factories, strengthen its skills base and produce with greater added value.
Costs, taxation, automotive: the drivers behind France’s industrial decline
Since the 1980s, employment in industrial sectors has almost halved, representing a loss of 2.2 million jobs. The decline accelerated in the 2000s. Today, industry’s share of French GDP is significantly lower than in several major European economies, particularly Germany and Italy.
How can this be explained? First, producing in France has become more expensive, not only because of wages, but also because of purchases, services, transport and other costs included in production. Second, production taxes have placed additional pressure on industry, even though the sector is directly exposed to international competition.
The positioning of French supply has also played a role. In several sectors, France has found itself in a mid-range segment that is difficult to defend: too expensive compared with low-cost countries, but not always differentiated enough compared with high-end manufacturers.
The automotive sector is one example of this decline, moving from a surplus of 5 billion dollars in 2000 to a deficit of 20 billion in 2019.
How can France catch up industrially?
To catch up, France must address the factors that still hold manufacturers back. Action is needed simultaneously on costs, factories, innovation, skills and exports.
Reducing the burden on production
Production taxes weigh on companies before they have even generated a profit. Reducing this burden could give manufacturers more room to invest, modernise their sites and better withstand international competition.
Investing in more efficient factories
France must also catch up in the modernisation of its production tools. The gap between France and other European countries remains significant. In 2019, France had 177 industrial robots per 10,000 employees, compared with 346 in Germany. This type of investment must make factories more productive, but also more responsive.
Escaping the mid-range trap
France cannot sustainably defend an industry that is too exposed to price-based competition. To regain ground, industry can focus on products that are more reliable, better designed, more durable, better supported and more closely aligned with customer needs.
This is one of the lessons from the contrast with Germany. German industry has defended its positions more effectively thanks to a stronger move upmarket, particularly in the automotive and machinery sectors. France can follow this example in the sectors where it wants to remain strong.
Turning innovation into an industrial advantage
French industry needs innovation, but also productive outlets. Technologies must be turned into products, factories and markets. Healthcare, hydrogen, cybersecurity and decarbonisation can create value if projects genuinely move into production.
Training the skills industry needs
Industrial catch-up also depends on the availability of skills. Factories need skilled operators, maintenance technicians, engineers, data specialists and people capable of operating automated equipment.
Beyond training, these professions must be made more attractive, and industrial career paths must be better valued.
Regaining export positions
Competitiveness is also measured in foreign markets. France’s international presence is weakening, particularly in certain key industrial sectors. The automotive trade balance has become negative.
To regain market share, French manufacturers need better support, particularly SMEs and mid-sized companies. This requires economic diplomacy, support for industrial sectors, commercial presence and the image of Made in France.
France still has industrial strengths, but it must turn them into solid positions in the market. Catching up will depend on an industry capable of investing, innovating, producing with greater value and better selling what it manufactures.
(1) Cahiers français, Les défis de l’industrie française, January–February 2022, no. 425.