Between the early 2000s and 2019, France’s manufacturing share of GDP fell from 23% to 10%. Afterwards, with the health crisis, it dropped slightly again, below the 10% threshold. Unfortunately, unless there is a very unlikely jump, three recent events could destroy it completely.
Poor control of energy expenditure
Energy consumption in 2021 in industry increased by 7%. But it has not, however, caught up with its level before the health crisis of 2020. At the same time, the energy bill has risen sharply in 2021 (+46%). This is what a recent study by the National Institute of Statistics and Economic Studies (INSEE) reveals.
When taxes are among the highest in the world and energy costs are five times higher than in the United States, it is not surprising that for capable manufacturing companies, offshoring is not only desirable but necessary for survival. If this relocation takes some time, the abandonment, little by little, of projects on our territory is immediately noticed, for example some of our big industrial companies: Safran, Saint-Gobain, Solvay which cancelled French or European projects to execute them in the United States. In recent years, we have seen a very strong rebound in the exchange of capital from France to the United States, which illustrates this last observation very well.
High inflation but low competitiveness.
The economic fallout of the war in Ukraine and the counter-blow of the health crisis is putting us in a period of very high inflation.
This situation is set to worsen with a new law recently passed by the U.S. Congress: the Inflation Reduction Act, which will further increase the attractiveness of the U.S. industrial sector by providing direct subsidies for the installation of factories and assistance to consumers who need it.
President Emmanuel Macron is threatening to do the same in Europe, but that could lead to a protectionist war. There remains the possibility of aligning compulsory levies with the levels of our German neighbors, which could eventually make the country competitive and sustainable!
The issue of the carbon tax = Europe’s suicide
As if these obstacles were not enough, Europe has just decided unilaterally to impose a carbon tax.
This may not be a bad idea, but unfortunately two conditions are not met:
- It must apply to all countries facing the risk of double shortage, but above all inflation, since consumers will pay the price. So unless we can produce at low cost in Europe, we will have years of inflation. This is possible in some Eastern European countries, but not in France because of its fiscal and administrative environment.
- The tax should apply to all products, from raw materials to finished products. Unfortunately, this was not the case in the European project, initially limited to raw materials: steel, cement, fertilizer, aluminum and electricity.
The example of a knife heard on Les Experts, hosted by Nicolas Doze, illustrates the real problem of this tax: If a knife made entirely of steel was manufactured in France from imported steel, a carbon tax would apply. If it is produced abroad, it will not be taxed.
It would therefore not be surprising if the Laguiole knife was only made in China. This decision, applicable from 2026, is the culmination of our European thinkers who have found the ultimate weapon to achieve “zero CO2 emissions”: it is the collective suicide of Europe!
Industry still represents half of French exports. In 2021, it employs 2.7 million people and has a turnover of 870 billion euros. The concern is that the share of manufacturing industry in GDP will decrease again by a factor of 2 or 3, with predictable consequences.
The government is putting in place numerous measures to help industries face the strong increase in costs, especially those related to energy. For example the device of aid to the companies (measure of support to the payment of the electricity bills (tariff shield…).
Many industries will disappear or relocate, which will lead in the long term to the disappearance of our French know-how and make it less and less competitive.