Foreign direct investment (FDI) in France

FDI in Figures

As a result of the COVID-19 pandemic, FDI flows to France fell by -47% in 2020, from USD 34 billion recorded in 2019 to USD 21 billion, partly due to lower M&A sales, which fell from USD 18 billion to USD 5 billion, according to the World Investment Report 2021 published by UNCTAD. The stock of FDI in 2020 was about USD 968 billion. Despite the crisis, investment in certain strategic sectors, such as R&D, health care and renewable energy, recorded a rise. According to OECD data, FDI flows to France rebounded to USD 10.8 billion in the first half of 2021. France is the 18th largest recipient of FDI in the world (losing three positions compared to 2019). Luxembourg, the Netherlands, the United Kingdom and Switzerland are the main investors in France and represent more than 50% of the stock of FDI. According to data published by the Bank of France, FDI stocks are mainly intended for the manufacturing industry, real estate, and for financial and insurance activities. The Paris region has the largest concentration of multinational headquarters in Europe (Global 500 ranking from Fortune magazine). One of President Emmanuel Macron's goals is to attract more multinationals currently based in London.

The country is ranked 32nd out of 190 countries in the Doing Business 2020 report published by the World Bank (latest report). The country's assets are its position as the third European power, its highly qualified workforce, its vast industrial base, its agricultural resources, its world cultural reputation and its geographic location in the center of Europe.

What to consider if you invest in France

Strong Points

France is one of the top ten world economic powers and has many assets to attract foreign investors:

• A strategic geographical location in the centre of Western Europe
• A developed tertiary fabric (including tourism), a vast industrial base and strong agricultural production capacity
• Leading infrastructure and quality public services
• A skilled and productive workforce (2nd European country in terms of hourly productivity) and a dynamic demographics
• An investment-friendly business environment and a relatively stable and transparent legal framework
• A diversified economy that is full of a wide range of players ranging from large multinationals to high-tech start-ups (French tech).

Weak Points

The main obstacles to attracting FDI in the French economy are:

• One of the highest corporate tax rates in the world
• High cost of labour
• Heaviness of the tax and work regimes
• High unemployment rate (7.9% in 2021, INSEE) which particularly affects young people and older workers
• Growing inequalities
• High public spending fuelling already significant public debt (112.3% of GDP in 2021, IMF)
• A low level of SMEs operating for export or investing in innovation

Government Measures to Motivate or Restrict FDI

Many reforms have emerged in recent years with the aim of revitalizing the national economy and attracting foreign investors. Here are the main ones: 

• The number of administrative formalities for the establishment of foreign companies has been reduced. 
• The establishment of a tax credit program of 20 billion EUR (competitiveness tax credit), the abolition of the solidarity tax and the creation of the research tax credit and incentives for young innovative companies. 
• The reform of the labour legislation reinforcing vocational training and adding more flexibility to the labour market. 
• The reduction of the corporate income tax rate from 33% to 25% by 2022.
• Competitive taxation of research and temporary exemption arrangements for innovative start-ups and new businesses.
• Foreign companies have access to the same subsidies as French companies (support for productive investment, R&D, vocational training, job creation, etc.).

Bilateral investment conventions signed by France

France has signed bilateral investment agreements with 115 countries.
To see the list, click here.

Find out more about Investment Service Providers in France on GlobalTrade.net, the Directory for International Trade Service Providers.