10 YEARS OF PUBLIC
POLICIES IN FAVOUR OF
INDUSTRY: RESULTS THAT
ARE STILL FRAGILE
Communication to the finance committee of the national Assembly
November 2024
2
Executive Summary
According to INSEE, "industry includes economic activities that combine production
factors (facilities, supplies, labour, knowledge) to produce material goods for the market". This
traditional definition equates industry with the production of tangible goods. Industry, as
defined by the French and European statistical nomenclatures, includes the manufacturing
industry sectors, as well as mining and quarrying (gravel pits, sand pits, etc.), the production
and distribution of electricity, gas, steam and air conditioning, and the production and
distribution of water, sewage, waste management and pollution control.
Public policies in favour of industry are characterised by a wide variety of objectives,
direct and indirect effects and levers for action. They traditionally group together so-called
horizontal policies, which act on the framework conditions for business activity (taxation,
production costs, research and development, innovation, skills), and so-called vertical policies,
which focus on specific sectors or companies. The design and implementation of industrial
strategies to coordinate these different public policies is a major economic policy challenge.
Against other comparable major European countries, France experienced a faster rate
of de-industrialisation (measured by the decline in the share of industrial value added in GDP)
between 2000 and 2010. Following the Gallois report of 2012
1
and the realisation that France
had fallen further behind its neighbours, France gradually changed its strategy.
Cross- functional actions with macro-economic objectives to improve cost competitiveness
(labour costs, taxation) and non-cost competitiveness (training - skills, research and
development and innovation) have been strengthened, and then combined with sectoral
support. These initiatives, which have taken a variety of forms, are showing contrasting results
in 2024.
It is against this backdrop that the national Assembly has asked the Court of Accounts
to carry out a review of ten years of public policy in favour of industry, taking stock of the
strengths and weaknesses of French industry, analysing the objectives and resources
mobilised
for
cross-cutting
policies
and
the
results
obtained
over
the
period
2013- 2023. Sectoral policies (defence, health) and instruments such as public procurement
and the regulation of market access and prices are not examined in this report.
Deindustrialisation: a more marked trend in France than in other European
countries
Two major crises have had a lasting impact on the level of industrial production over the
period: the 2008-2009 crisis, with France only returning to its 2007 level in 2013, and the health
crisis, with value added in industry exceeding its 2019 level in value terms by 2022, without
returning to it in volume terms. Against this backdrop, the share of industrial value added in
GDP has stabilised in France between 2011 and 2019 at around 14 %
2
. This rose to 15 % in
2023 as a result of the rebound in the energy sector. The share of manufacturing industry
remains stable at 11 % of the economy's total value added, well below that of Germany (21 %)
and Italy (17.5 %). Finally, the downward trend in industrial employment was reversed over the
period from the end of 2017. Apart from a one-off fall in 2020, salaried employment in industry
continues to rise, and by the end of 2021 had exceeded the level reached before the health
crisis. The share of industrial employment, which stabilised at around 10 % of total employment
1
Pact for the Competitiveness of French Industry
, Report to the Prime Minister, 5 November 2012.
2
11 % for the manufacturing industry.
3
in 2023, remains significantly lower than in neighbouring countries (17 % in Italy and 18 % in
Germany).
There are relatively few industrial companies, numbering 274,200 in 2021, or 7 % of all
mainly non-agricultural and non-financial market sectors
3
, and 8 % of legal units
4
, as in 2012.
On the other hand, they account for a larger proportion of salaried employment, 23 %, or
3.2 million full-time equivalent (FTE) employees, although this is falling slightly (25 % in 2012).
Finally, given their capital intensity, they account for 28 % of the value added of the mainly
non-agricultural and non-financial market sectors, i.e. €325 billion, 28 % of investment and
62 % of export sales.
Industry, more than other economic sectors, is characterised by a concentration of
activity in large and medium-sized companies, organised in the form of groups with highly
diversified industrial, commercial or service subsidiaries, and strongly defined by their activity
abroad. In 2021, multinational industrial firms, i.e. those with subsidiaries in France and
abroad, accounted for 69 % of FTE employees in the industrial sector and generated 78 % of
the added value produced in France.
The knock-on effects of industry on the economy have evolved in contrasting ways over
the period. Productivity gains in industry, which have been slowing since the late 1990s, have
fallen more than in other countries since 2019, with negative effects on productivity in the
economy as a whole. This stall reflects the fact that employment has grown faster than activity
and can be explained by several factors, both cyclical (retention of labour) and structural (lack
of skills and qualifications). Although the knock-on effects on local activity and employment are
difficult to measure precisely, it is a fact that 75 % of industrial jobs are located outside
metropolitan areas, making industrial activity a major lever for social and territorial cohesion.
De-industrialisation, defined as the decline in the share of industrial value added in GDP,
is affecting most advanced countries, but also emerging countries such as China. It is the result
of the combined effect of productivity gains in industry (leading to a fall in the relative price of
industrial products), the development of services, increased subcontracting (outsourcing) and
the fragmentation of value chains. In France, industrial employment peaked in 1974 before
declining at a more or less steady rate until the period preceding the health crisis.
Over the last decade, France's share of world trade has fallen, while countries such as
Germany and Spain have managed to maintain theirs. This trend is mainly attributable to
industry, which accounts for almost 70 % of French exports. The balance of trade in goods,
which had turned positive in the 1990s, returned to deficit from the early 2000s and has steadily
deteriorated since then.
With a 20 % growth in industrial value added between 2000 and 2019, France is the third
largest industrial country in the EU, behind Germany (61 %) and Italy (28 %). The steady
decline in French industry's market share of European exports and the deterioration in the
trade balance with EU countries over the period 2012-2022 also attest to an industrial dynamic
that lags behind that of other European countries, particularly in manufacturing.
The structure of the trade balance reflects changes in the productive specialisation of the
French economy over the last 20 years. By 2023, France was one of the world's leading
exporters in four key historical sectors: top exporter for beverages (15.2 % of export value) and
perfumes and cosmetics (also 15.2 %), and second worldwide for leather and luggage (14 %)
and aeronautics and space (13.6 %)
5
. Overall, industrial activity has specialised in high- and
medium-technology sectors
6
(aeronautics, civil and military industries, chemicals and
3
The scope used by Insee to compile statistics at company level is that of companies in the mainly non-agricultural
and non-financial market sectors, which account for just over half of total value added.
4
The legal unit, company or sole proprietorship, is the main unit registered in the National Register of Companies
and Establishments (Sirene) managed by Insee and identified by its Siren number.
5
DG Trésor - Banque de France
- DGDDI,
2024 annual report on foreign trade
.
6
The OECD classifies industrial sectors into high-, medium- and low-tech categories according to the level of their
R&D expenditure in relation to their turnover.
4
pharmaceuticals) and in low-technology sectors (agri-food), the share of which is increasing.
The steepest declines were in certain medium-technology sectors, such as automotive,
electrical products and machinery and equipment.
Major efforts to boost business competitiveness, with little focus on
industry apart from the reduction in production taxes
From 2014 onwards, as part of a drive to exempt low-wage earners from social security
contributions that began in the 1990s, the Employment Competitiveness Tax Credit (CICE)
and the reductions in social security contributions that supplemented and then replaced it have
had the effect of bringing labour costs into line with productivity costs. Concentrated on low
salaries, the measures to reduce charges mainly benefit service activities and certain industrial
sectors where salaries are lower (agri-food). They can also benefit industry indirectly, through
the cost of intermediate consumption. Although French industrial companies have benefited
from a certain moderation in labour costs, hourly labour costs remain well above those in Italy,
Spain and Eastern Europe. They are equivalent to those of Germany, whose industry can
nevertheless rely on a structurally superior quality-price ratio and range positioning.
Starting in 2017, the public authorities have also taken measures to rebalance business
taxation (corporation tax, production taxes) in order to reduce the gaps with the European
average and comparable countries. Thus, while in 2019 France applied the highest average
effective tax rate
7
for non-financial companies in the EU (35 %), this rate was 25 % in
2022, which is lower than in Germany and Spain and closer to Italy. However, the taxation of
industrial companies remains sub-optimal due to the existence of production taxes whose
calculation methods are unfavourable to production in France, and of which industry bears a
significant share. By targeting companies irrespective of their profitability, the company value
added tax (CVAE) and company social solidarity contribution tax (C3S) affect their profitability
and ability to export. The review of their calculation methods could be pursued provided that it
forms part of an overall change in company taxation that neutralises the effects on public
finances.
Finally, while the cost of energy has been a strong comparative advantage for French
industry, with electricity prices 40 % lower than the EU average and 92 % lower than prices in
Germany between 2012 and 2020, the end of the regulated access mechanism for historical
nuclear electricity (ARENH) on 1 January 2026 and the planned increase in energy prices
represent a major risk to the competitiveness of French industry.
Impediments to non-cost competitiveness
The French economy also suffers from structural handicaps that undermine its off-cost
competitiveness. The contraction of industry is limiting the ability to fund research, which is not
translating sufficiently into industrial innovation. France's rise from 22
nd
to 11
th
place in the
World Innovation Index drawn up by the World Intellectual Property Organisation is not
reflected in the indicators relating to industrial innovation, where France lags behind Italy and
Germany.
The industry's image also remains poor, which is detrimental to the attractiveness of
industrial training and careers. For example, among apprentices who had completed a course
in "metals and mechanics" and who were employed in January 2021 six months after finishing
their studies, only 55 % were working in a job corresponding to their training (28 % for
vocational high school students).
7
European indicator used to assess the impact of taxes on companies' investment decisions. It includes taxes on
company profits, dividend income and capital gains.
5
Employers are therefore finding it increasingly difficult to recruit qualified staff: 52 % of
companies in industry were experiencing recruitment difficulties in the 1st quarter of 2024, and
19 % said they were limited in their activity by a lack of staff. This proportion is higher than in
Italy or Spain. Reducing recruitment pressures in industry means defining a sustainable
system to support training for industry employees. On the other hand, policies on employment
and inclusion, training and guidance, but also on territorial cohesion, housing, transport and
early childhood, or economic development and ecological transition must fully integrate this
concern, in conjunction with sectoral policies.
The improvement in France's attractiveness, as measured by the number of projects,
remains fragile. Projects in France involve fewer site creations than in Germany and the UK.
The business environment can still be simplified to make it easier for companies to grow.
Despite the provisions adopted by Parliament to secure and accelerate industrial
establishment projects in 2020, 2021 and 2023, a significant gap remains with other EU
countries in terms of the time actually taken (an additional 4 to 8 months depending on the
procedures), according to a report carried out at the request of the Government in 2022
8
Public support not always targeted at industry, increasing since 2020 but
of uneven effectiveness
The Court measured public support for industry from 2012 to 2022 on the basis of direct
or indirect financial transfers to industrial companies
9
in the form of equity investments,
subsidies, loans and repayable advances. They amount to €17bn per year from 2012 to
2019 and €26.8bn per year over the period 2020-2022
10
, excluding equity interventions.
Excluding tax expenditure and social niches, this amount is reduced to €5.8bn
11
over 2012-
2019 and €9.6bn
12
over 2020-2022. Local and regional authorities account for a marginal share
of these transfers, with companies benefiting above all from their cross-functional economic
development initiatives in the areas of business support and land.
Equity investment in industrial companies will amount to €2.2 billion a year over the
period 2012-2022, in the form of equity investments by the
Agence des participations de l'État
in strategic industrial sectors and for sovereignty purposes (defence), Bpifrance for the
development of SMEs and ETIs,
Caisse des Dépôts
and
Ademe Investissement
. The overall
monitoring of these investments needs to be improved in order to measure the relevance of
the accumulation of interventions in certain companies or sectors and the associated risks.
The policy of the
Agence des participations de l'État
needs to be clarified and coordinated with
that of Bpifrance,
Caisse des Dépôts
and
Ademe Investissement
.
Policies in support of R&D, employment and training, energy, foreign trade and
innovation account for 86 % of the total budget cost, all types of expenditure combined. Within
these cross-functional policies, certain instruments are of particular benefit to industry: the
research tax credit (€5.6bn per year, of which 61 % for industry), partial activity (€3.3bn per
year, of which 47 % for industry, excluding the health crisis), taxation on energy-intensive
companies (€1.1bn per year for industry over the recent period), and export insurance (at a
limited budgetary cost). For companies and many observers, the research tax credit is an
important factor in attracting and maintaining R&D activities in France. Without calling its
principle into question, a number of evaluation and economic analysis studies nevertheless
suggest that its basis should be adjusted to improve its effectiveness. Against this backdrop,
8
Laurent Guillot, IGF, DITP,
Simplifying and accelerating economic activity creation in France
, 2022.
9
Identified by the NAF code included in their
SIRET
or
SIRENE
identifier.
10
Including the portion of the public energy service financing State aid to businesses under European regulations
(€2.8bn over the period).
11
Energy (€3.2bn/year), R&D (€1.1bn), Part-time work and apprenticeships (€0.8bn), Business financing (€0.4bn),
Foreign trade (€0.1bn) and Local authorities (€0.31bn).
12
Energy (€3.7bn), R&D (€1.8bn), Part-time work and apprenticeships (€1.9bn), Business financing (€1.9bn),
Foreign trade (€0.1bn) and Local authorities (€0.31bn).
6
the Court recommends that the ministries of the economy, finance and industry and the
ministry of higher education and research adjust the basis of expenditure eligible for the CIR
in order to improve its effectiveness and assess a measure for capping the CIR claim at group
level.
Budgetary expenditure is concentrated on innovation policy and industrial support plans,
the amount of which increases towards the end of the period. However, the results of the
successive plans to support the reindustrialisation or digitisation of industry between 2012 and
2022 are inconclusive. They are insufficiently targeted and the instruments chosen are not very
effective, with the exception of certain sectors such as aeronautics and microelectronics,
where the State has been able to demonstrate continuity.
The future investment programmes implemented between 2010 and 2019 have had a
limited impact on industrialisation. Since 2020, the public authorities have supplemented
horizontal policy instruments with a "vertical" support instrument, particularly in the form of
subsidies, as part of France 2030. Initial evaluations show that the targeting of public
investment should be tightened and that the intervention policy should give greater priority to
the most effective instruments by limiting the use of subsidies.
An industrial strategy in need of further development
Industrial policy, the aim of which is to maintain or develop industry's share of national
added value, cannot be reduced to aid to companies, which is often poorly targeted at industrial
companies. Macro-economic and horizontal policies concerning the competitive environment
of horizontal companies, which must be coordinated, have a decisive role to play.
The industrial strategy must assert its cross-cutting nature and become a permanent
fixture at the heart of horizontal competitiveness policies and the actions of sectoral ministries.
It must be an integral part of policy objectives in the fields of education, energy transition,
environmental protection, health, innovation and research.
For France, the challenges of coordination lie at both the national and European level.
Industrial policy is a shared responsibility between the EU and its Member States
13
within the
limits of common policies on the internal market and competition. The Draghi report, submitted
in September 2024, explicitly mentions the need to align trade policy, competition policy and
industrial policy, going beyond the developments initiated since 2015 and the measures
recently announced after the health crisis and in response to Russia's invasion of Ukraine.
Their strategic objective is to reduce Europe's dependence in six sectors: critical raw materials,
semi-conductors, health, digital, agri-food and energy. A number of sectoral development
instruments have been put in place through European innovation programmes and the
Important Projects of Common European Interest (IPCEI) mechanism, which calls on national
public and private funding. They have recently been supplemented, in 2023 and 2024, by
commercial policy instruments.
The national industrial strategy, and the choice of its instruments and projects, must fit
firmly into this framework, prioritising projects supported on a European scale. The relaxation
of State aid during the health and energy crises has increased the risks of fragmentation of the
internal market and inefficiency of national aid. The IPCEI mechanism, which regulates the
use of national subsidies to ensure that subsidised productive investments meet strategic
needs at EU level, is designed to control this risk. The Draghi report calls for this European
framework to be expanded, while stressing that improvements are needed to make it more
responsive. Other forms of European cooperation can also be envisaged, within an
intergovernmental framework (Airbus) or a Community framework (European Space Agency,
European programmes).
13
Article of the 1992 Maastricht Treaty, reproduced in Article 173 of the 2007 Treaty on the Functioning of the
European Union (TFEU).
7
Progress has been made in organising public authorities to design and implement
industrial policy at the national level. The reorganisation of the Directorate General for
Enterprise (DGE), the National Industry Council and the strategic sector councils have helped
to structure and strengthen dialogue with the sector on major issues. However, a more
strategic dialogue on the industry needs to be developed between public players within the
State and with local authorities, based in particular on regular forward-looking studies. In
addition to the commonly used macro-economic indicators (value added, employment, foreign
trade), greater attention must also be paid to territorial impacts and to the disparities between
sectors and companies in the industrial sector, using appropriate indicators.
8
Recommendations
Measures to boost the competitiveness of industrial companies
1.
Review the methods of calculating production taxes that are unfavourable to industry, provided
that they are neutral for public finances
(ministry of the economy, finance and industry
).
2.
By 2025, define a sustainable system to support skills development for employees in industry
(ministry of the economy, finance and industry, ministry of labour and employment).
Measures relating to the effectiveness of public support
3.
By 2025, define the methods for consolidating the State's direct and indirect holdings in the
State's accounts by identifying industrial companies in order to monitor all associated risks
(ministry of the budget and public accounts).
4.
For the sake of consistency of public investment, clarify the State's investment policy in
industrial sectors by 2025, linking it to the policies of the
Caisse des dépôts et consignations
,
Bpifrance and
Ademe Investissement
(ministry of the economy, finance and industry).
5.
Improve the efficiency of spending, adjust the base of expenses eligible for the research tax
credit (CIR) and assess the methods for capping the CIR claim
(ministry of higher education
and research, ministry of the economy, finance and industry).
6.
Undertake a review of the priorities of France 2030 and stop or redirect funding for certain
projects from 2025 onwards, following the recommendations of the Monitoring Committee
(general secretariat for investment)
.
7.
Give priority to financial instruments and repayable advances for public financial support to
industrialisation projects and limit the use of subsidies
(ministry of the economy, finance and
industry, general secretariat for investment
).
Measures relating to the design and implementation of industrial strategies
8.
Prioritise projects supported at the European level in the industrial strategy
(ministry of the
economy, finance and industry
).
9.
Develop, by 2026, a set of macro- and micro-economic indicators to measure the impact of the
industrial strategy, taking into account the disparity of the industry and the challenges of
international comparison
(ministry of the economy, finance and industry, Insee
).