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EN

Enterprise and Industry

FRANCE

2013 SBA Fact Sheet

In a nutshell

The SME sector in France was hit hard by the global recession in 2008-09 and subsequently

experienced a brief period of recovery, which lost momentum in 2012. Employment in French SMEs

grew less rapidly between 2008 and 2012 than that in large companies, while value added was more or

less stable for both groups.

French SMEs continue to benefit from good framework conditions for trade, an administration that is

fairly responsive to the needs of the small businesses, comparatively fast transposition of EU law and

good access to state aid and public procurement opportunities. Nevertheless, the countrys overall

performance on the SBA grid continues to be hampered by below-average results when it comes to

exploiting the opportunities offered by new green markets and a somewhat lower intensity of

entrepreneurial activity.

About the SBA Fact Sheets1

The Small Business Act for Europe (SBA) is the EUs flagship policy initiative to support small and medium-

sized enterprises (SMEs). It comprises a set of policy measures organised around ten principles ranging

from entrepreneurship and responsive administration to internationalisation. In order to improve the

governance of the SBA, the 2011 review of the Act called for improved monitoring. The SBA Fact Sheets

are published annually and aim to improve understanding of recent trends and national policies affecting

SMEs.

Since 2011, each EU Member State has appointed a high-ranking government official as its national SME

envoy. SME envoys spearhead the implementation of the SBA agenda in their countries.

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2013 SBA Fact Sheet France 2

1. SMEs in France basic figures

EU27 EU 27 EU 27

Num be r Share S h a r e Num be r Share S h a r e Billion Share S h a r e

Micro 2,334,664 93.8% 92.1% 4,167,624 28.6% 28.7% 223 26.1% 21.1%

Small 128,552 5.2% 6.6% 2,735,962 18.8% 20.4% 149 17.5% 18.3%

Medium-sized 20,628 0.8% 1.1% 2,204,603 15.2% 17.3% 128 15.0% 18.3%

SMEs 2,483,844 99.8% 99.8% 9,108,188 62.6% 66.5% 501 58.5% 57.6%

Large 4,470 0.2% 0.2% 5,439,018 37.4% 33.5% 355 41.5% 42.4%

Total 2,488,314 100.0% 100.0% 14,547,206 100.0% 100.0% 856 100.0% 100.0%

These are estimates for 2012 produced by London Economics, based on 2008-10 figures from the Structural Business Statistics

Database (Eurostat). The data cover the 'business economy', which includes industry, construction, trade, and services (NACE Rev. 2sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such

as education and health. The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries.

The disadvantage is that for some countries the data may be different from those published by national authorities.

Num ber of enterprises Num ber of em ployees Value added

France France France

The French SME sector, mirroring the sector in

Europe as a whole, comprises an overwhelming

majority (99.8%) of the enterprises in the businesseconomy. SMEs contribution to employment (63.2%)is also significant, though lower than in the EU in

general, where 67% of private sector employees workfor SMEs. French SMEs account for almost 60% ofthe 861 billion of economic value added produced byall private firms.

The French SME sector has changed radically in the

past 15 years: the proportion of SMEs belonging to a

group increased from 21% to 49%. As aconsequence, employees in SMEs not belonging to a

group accounted for less than half of the labour force

in the business economy in 2009, and SMEs not

belonging to a group accounted for 44% of the addedvalue of the business sector. These percentages

relate to a total of 2691 million businesses in Francein 2009.

The SME sector in France was hit hard by the global

recession of 2008/09 and subsequently experienced a

brief period of recovery, which lost momentum in

2012. Companies in construction have been dealing

with significant difficulties and, while the crisis has

shaken the entire sector, SMEs remain much more

vulnerable than the large construction companies,

which in 2012 succeeded in generating value added

above the 2008 pre-crisis levels. This may be

because large French construction firms have a solid

position on the global markets, while small firms

remain more focused on local markets. Also, they

often act as subcontractors to large firms and are thus

under strong cost pressure when it comes to winning

contracts.

The respective growth trends for SMEs and large

enterprises in the business economy differ in a

number of ways. For example, employment in French

SMEs grew more rapidly between 2008 and 2012

than that in large companies (by slightly above 12 %as against less than 8.4%), while value addedremained more or less stable for both groups. Hence,

the efficiency of French SMEs, measured by labour

productivity (here defined as value added per head),

has deteriorated more rapidly since 2008.

Worth noting is also the strong growth of SMEs in

the professional, scientific and technical sector

between 2008 and 2012 in terms of value added

(more than 15%), employment (about 30%) andnumber of firms (about 30%). There are severalexplanations for this trend. The first is the tax credit

given in 2009 to companies investing in research and

development, which gave a strong boost to the sector.

Also, the French government launched a 35 billionprogramme (the Programme Investissement dAvenir

PIA) which is stimulating new company set-ups in

areas of innovation such as science and research,

technology transfer, etc. Finally, the fact that large

companies increasingly opt to subcontract their

activities (even R&D) has contributed to the

development of small firms in the sector.

The development of business demographics is

multifaceted.The dynamic of enterprise creation and

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liquidation over past four years has been significantly

affected by the introduction of auto-entrepreneur

status by the government in 2009. This measure,

which has proved highly successful, was aimed at

reducing the taxes and other costs of running a small

business or being self-employed in France. By 2010,

the number of business registrations in France

peaked at 622000, of which about 200000 were auto-entrepreneurs. However, the government announced

that it would be changing the auto-entrepreneur

arrangements by the end of 2012 and the number of

business registrations decreased to about 550000new firms in 2012. About 53000 insolvencies a yearwere registered over this period.

As regards Frances intra-EU trade in goods, SMEs

accounted for 41% of total trade value in 2010(though only 17.5% of the total trade value, if oneexcludes SMEs belonging to a group). International

trade involving French SMEs shrank by 15 % in the

period 2008 to 2010. The number of exporting SMEs

also decreased (by 7%). Large enterprises resultswere better, with growth rates of -3 % in terms of tradevalue and -2% in terms of number of exportingcompanies.

The high-tech manufacturing and knowledge-intensive

sectors are considered key for restoring the

competitiveness to the European economies and kick-

starting sustainable growth. In France, these sectors

are relatively smaller than in Europe as a whole, but

their contribution to value added still matches the

average.

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SME trends in France2

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2. Frances SBA profile

France maintained its average SBA profile in 2012.

On the one hand, the French SME sector continued to

benefit from good framework conditions for trade, an

administration that is fairly responsive to the needs ofsmall business, comparatively fast transposition of EU

law and access to state aid and public procurement

opportunities. On the other hand, the countrys overall

performance on the SBA grid continues to be

hampered by below-average results when it comes to

exploiting the opportunities offered by new green

markets and a somewhat lower intensity of

entrepreneurial activity.

Indicators measuring various aspects of SME policy

and performance point to stagnation in most areassince the adoption of the SBA in 2008. Most progress

has been achieved in the transposition of EU law,

while access to affordable financing has become more

difficult in the context of the financial and economic

crisis. For the other principles of the SBA, the status

quo of 2008 is generally maintained.

In 2012, France continued to implement the SBA

agenda, but at a somewhat slower pace than

previously. This is due to the change of government

following the spring elections, and the new

governments intention to chart a new course involving

significant departures from previous public policies.

The most important initiative in 2012 was the adoption

of the research tax credit (Crdit impt recherche),

which has been expanded to cover costs relating to

design, prototype and pilot products.

Following the Rapport Gallois on measures to

increase economic competitiveness, the National Pact

for Growth, Competitiveness and Employment (Pacte

national pour la croissance, la comptitivit et

lemploi) was adopted by the government on

6 November 2012. This involves a roadmap to greater

competitiveness in French industry along eightstrategic axes, with 35 operational measures, some of

which are aimed at administrative simplification

(rationalisation of taxes levied by the end of the year,

introduction of a one-stop shop, etc.).

France does not currently have a dedicated strategy

for the implementation of the SBA, nor a dedicated

SBA monitoring process. Implementation is followed

by the European Affairs Office in the Ministry of

Industrys Directorate-General for Competitiveness,

Industry and Services (DGCIS), which coordinates allaction taken under the SBA and has set up a network

of institutional partners.

Stakeholder consultations take place regularly on

various topics. A network has been created at regional

level of SME representatives (Commissaires au

redressement productif) charged with identifying and

articulating the needs of SMEs and keeping them

informed about national policies and measures

affecting them. At national level, entrepreneurs are

regularly consulted about the programme for a more

friendly business environment, launched under the

National Pact for Growth.

The new governments key future policy3priorities for

SMEs are improving access to finance and reducing

administrative burdens. The Public Investment Bank

(Banque Publique dInvestissement), which should

become operational in May 2013, is expected to

provide a local financing service supported by an

extended portfolio of financial instruments covering all

stages of business development, from start-up to

growth.

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Frances SBA performance: Status quo and development (2008-13)4

I. Entrepreneurship

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Despite recent improvements according to a majorityof indicators measuring entrepreneurship, France

continues to trail the EU average in this respect

because other Member States have made faster

progress. In recent years, entrepreneurial activity in

France has intensified, spurred by the introduction of

auto-entrepreneurstatus in 2009, which was followed

in subsequent years by a peak in business

registrations. The quality of entrepreneurial activity

also improved, with the proportion of opportunity-

driven entrepreneurs rising from 47% in 2009 to 50 %in 2012.

Frances entrepreneurship culture scores well on the

desirability of becoming self-employed,

entrepreneurial intention and motivation all

important factors in the countrys entrepreneurial

potential.

Entrepreneurial education seems to be losing ground,

however, as only 50% of adults (as against 60% in2009) currently believe that school education is

successful in providing students with the knowledge,

skills and motivation to encourage them to become

entrepreneurs.

Finally, societys perception of entrepreneurship, as

expressed by the degree of media attention received

by entrepreneurs and the social status accorded to

them, seems on average less favourable in France

than in the EU as a whole.

On the policy side, a wide consultation of

stakeholders (Assises de lentrepreneuriat) was

launched in January 2013, with nine working groups

being set up to seek ways of doubling the number of

growth businesses in the next five years. The

conclusions of the work were presented in April 2013

and were fed into a five-year entrepreneurship action

plan.

II. Second chance

The indicators measuring second chance give a

positive picture, but show almost no change from the

previous year. In essence, France continues to offer

comparatively favourable conditions for honest

entrepreneurs who have failed and want to start over

again. However, one significant barrier which remains

is the fear of failure and high level of risk aversion

among the French population. This seems to have

risen further as a result of the global economic crisis,

with the proportion of adults who believe honest

entrepreneurs deserve a second chance falling from

86% in 2009 to 80 % in 2012.No major policy initiativeswere reported in 2012.

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III. Think small first

French SMEs continue to benefit from a well-

developed institutional and legislative framework, but

still face significant legal and administrative

constraints on a daily basis in their dealings with the

administration. Entrepreneurs perceive government

regulation as imposing a heavier-than-average

burden, with employment legislation (strict and

complicated rules for hiring and firing workers) the

most problematic area.

Following the Rapport Gallois on measures to

increase economic competitiveness, the National Pact

for Growth, Competitiveness and Employment (Pactenational pour la croissance, la comptitivit et

lemploi) was adopted by the government at the

beginning of 2013. This involves a roadmap aiming to

greater competitiveness in French industry along

eight strategic axes, with 35 operational measures,

some of which are aimed at administrative

simplification (rationalisation of taxes levied at the end

of the year, introduction of a one-stop shop, SME test,

etc.).

IV. Responsive administration

Frances modern and responsive public administrationscores far above the EU average, but the pace of

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administrative reform has slowed down significantly,

as shown by only marginal changes in its performance

against the relevant indicators.

It is currently possible to start a business in France in

four days, at a cost of 83, with no capitalrequirements. Since 2012, entrepreneurs have been

able to start their business online. Nevertheless, while

it is very easy and cheap to start a business, running it

on a daily basis typically brings additional obstacles.

Other important indicators relating to day-to-day

business operations (number and duration of tax

payments, cost of enforcing contracts) and milestonesin the life-cycle of a business give a generally positive

picture. However, there is room for improvement on

certain aspects not captured by statistics, such as the

provision of (legal, tax, social or bankruptcy-related)

public advisory services for SMEs. Finally, frequent

changes in administrative rules and procedures make

daily administrative tasks difficult and time-consuming

for SMEs.

No major policy initiatives were reported in 2012.

Still, under the National Pact for Growth,

Competitiveness and Employment, a programme of

business-friendly measures will be implemented in

2013, some aimed at administrative simplification

(e.g. introduction of a one-stop shop, rationalisation oftaxes levied at the end of the year).

V. State aid & Public procurement

France continues to offer comparatively favourable

conditions for SME access to state aid and public

procurement. The proportion of state aid earmarked

specifically for small and medium-sized enterprisesrose from 5% in 2010 to 7% in 2011, one percentagepoint above the EU average. However, a number of

SME stakeholders argue that state aid is used mainly

to maintain employment in average SMEs rather than

finance innovative small companies with high growth

potential.

Small and medium-sized enterprises account for a

higher-than-average proportion of the value of public

procurement contracts (45% as against 38% in theEU as a whole in 2008), but this is not yet matched by

their contribution to the economy (59% of gross valueadded).

No significant policy initiatives were reported in

2012. Nevertheless, some positive changes weremade to the public procurement system so as to allow

direct payments to subcontractors, the submitting of

proposals online and simplified access to information

on public tenders.

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VI. Access to finance

France offers SMEs average conditions for access to

various sources of finance, but progress on this front

has stalled and the return of the financial and

economic crisis has created a difficult climate for

businesses.

As result of tightened credit standards, SMEs access

to finance was more difficult in 2012 than in 2011. The

proportion of rejected loans increased from 11% to

14% and a greater number of business ownersnoticed reported that banks were less willing to

provide loans. At the same time, the conditions for

accessing public financial support, including

guarantees, were also more restrictive.

As compared with the EU average, French

businesses have fewer cash-flow problems due to the

loss of payments from bankrupt customers (2 % oftotal turnover as against 3% in the EU as a whole).However, the total time it takes for customers in

France to pay for delivered goods or services is close

to the EU average: 55 days as compared with 53. The

institutions and systems that can facilitate access to

finance, such as credit registry bureaux and the legal

rights system, are as solid as in most other EU

countries. The same can be said of the availability of

early-stage venture capital, which amounted to

0.019% of the countrys GDP in 2009.On the policy side, the Conseil des ministres put

forward a proposal for a public investment bank

(Banque Publique dInvestissement BPI) in the last

quarter of 2012 and this became operational in May

2013. The BPI was formed by a merger of three

existing funding structures: OSEO, the Strategic

Investment Fund (FSI) and CDC Enterprises. The

BPIs overall objective is to offer businesses with

priority given to very small enterprises, SMEs and

small and medium businesses a local financing

service supported by an extended portfolio of financial

instruments and consultation options that can be

called upon at any point in the business development

process. The BPI five-year budget of 42 billion isused to provide loans and buy shares.

Finally, amendments to the Research Tax Credit to

include an Innovation Tax Credit were announced.

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The aim of the Research Tax Credit, established in

1983 and updated several times since 2000, is to

reduce businesses RTD-related costs. The

government decided to extend this measure

downstream to (design, prototype and pilot) costs

relating to innovation. The changes will enter into

force at the beginning of 2014.

VII. Single market

Due to the size of the domestic market, French SMEs

generally have only a local vision for their businesses.

The lack of a strong export culture among SMEs is

reflected in below-average results in intra-EU export

and import performance. In terms of internal market

legislation and transposing EU into national law,

France seems to be performing significantly better

than its EU peers, with fewer directives awaiting

transposition and shorter accumulated delays.

No major policy initiativeswere reported in 2012.

VIII. Skills and innovation

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France is on a par with the EU as a whole in skills andinnovation, but progress has stalled recently. It has

average scores for all indicators measuring innovation

among SMEs and its performance is slightly below

average in terms of firms ability to sell and make

purchases online.

The two indicators measuring training and skills

development show somewhat divergent results. While

the proportion of firms providing vocational training to

their employees is very close to the EU average,

French micro-enterprises are less likely than their

peers to ensure that their employees take part in

lifelong learning activities.


IX. Environment

France scores below the EU average in this field, but

its performance varies somewhat between the

individual indicators.

On the one hand, despite slightly worse-than average

access to public support measures, French SMEs are

more likely to take steps to increase their resource

efficiency.

On the other hand, as compared with the EU average,

few companies in France have gained a foothold in

green markets, and even fewer have generated morethan 50% of their turnover by selling green productsand services.


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X. Internationalisation

Thanks to the generally good framework conditions for

trading, France scores well in this area. However, the

indicators measuring the performance of French

companies outside the EU remain rather low. Thisreflects the loss of competitiveness that has led to

almost a decade of decline in Frances foreign trade.


However, the National Pact for Competitiveness,

Growth and Employment (Pacte national pour la

comptitivit, la croissance et lemploi) and the Public

Investment Banks roadmap involve a specific

measure to support the internationalisation of 1000

SMEs.

Export funding arrangements should undergo reform

this year. Finally, reforms are also planned to bolster

and simplify the Volunteer for International

Businesses programme.

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3. Good practice

Below is an example of good practice from France to show what governments can do to support SMEs:

The research tax credit (Crdit impt recherche CIR)

This measure involves a tax reduction to support companies in-house research. Since its inception in 1983,

it has produced very positive results. The new government has confirmed that it will be maintained and

consolidated over the next five years. As from 2013, a flat rate of 30 % applies in all cases (higher rates forthe first two years have been removed).

In addition, the scope of the measure will be extended to downstream research phases, i.e. the first (design

and prototype) stages of innovation.

References

http://cache.media.enseignementsup-recherche.gouv.fr/file/CIR/58/6/CIR-03-12_vweb_212586.pdf

Important remarks

The Small Business Act (SBA) Fact Sheets are produced by DG Enterprise as part of the SME Performance

Review (SPR), which is its main vehicle for economic analysis of SME issues. They combine the latest

available statistical and policy information for the 28 EU Member States and nine non-EU countries which

also contribute to the EUs Competitiveness and Innovation Framework Programme (CIP). Producedannually, the Fact Sheets help to organise the available information to facilitate SME policy assessments and

monitor SBA implementation. They take stock and record progress. They are not an assessment of Member

States policies but should be regarded as an additional source of information designed to improve evidence-

based policy-making. For example, the Fact Sheets cite only those policy measures deemed relevant by

local SME policy experts. They do not, and cannot, reflect all measures taken by the government over the

reference period. More policy information can be found on a database accessible from the SPR website.

Please also see the end notes overleaf.

For more information

SME Performance Review:

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm

Small Business Act:

http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm

The European Small Business Portal:

http://ec.europa.eu/small-business/index_en.htm

[email protected]
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