In 2017, the 2 French companies on 3 put the investment on
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For half of the companies, the price war is the main risk weighing on the profitability
1 company 3 is planning to increase its investment expenditures in 2017
9 in 10 companies expect an improvement or stabilization of their cash flow in 2017
PARIS MAY 17, 2017 Thanks to the support of its 23 delegations spread over the entire territory of france, Euler Hermes, the global leader in credit insurance, has interviewed, between January and April 2017, more than 1 000 SMES and ETI French on their investment intentions, the state of their cash flow and their book orders. As a result, the fourth edition of the barometer, which, in the light of the macroeconomic context of France, brings an exclusive analysis of the current situation of businesses and their concerns in terms of demand and investment, in the light of a new quinquennium.
Investment : the companies have all the cards in the hand
Household consumption will be the main driver of the French economy in 2017, contributing 1.1 percentage points to GDP growth, and expected increase of +2.1% in 2017 and +2.3% in 2018 (+2.3% in 2016). French households are regaining confidence (index 100, its best level since may 2007). Also household investment should grow by +3.6% in 2017 and +4% in 2018, after +2.4% in 2016, in line with the rebound of the construction sector.
Public investment will also be at the rendez-vous in 2018. It is expected to increase by +2% from 2018, after 0.7% in 2017 and 0.1% in 2016. “All the components of the investment are waiting for you. After +2.8% in 2016, the total investment is expected to accelerate to +3.2% in 2017,” underlines Stéphane Colliac economist in charge of France at Euler Hermes.
For businesses, this renewed application is welcome. Turnover in industry (excluding energy) are expected to grow more quickly in 2017 and 2018 to +2.2% (+1.3% in 2016), also worn by the advantage of inflation (+1.1% in 2017, after 0.2% in 2016). On the other hand, the business margins have remained stagnant at 31.4% the past two quarters, while the effect of support measures (CICE) and the oil bit expensive fades. The role of economic policies has been major in the rebound of business investment : it has accelerated in 2016 (+3.6 per cent), supported by the measurement of suramortissement, which contributed to half of this performance.
The lifting of uncertainty surrounding the French presidential election led Euler Hermes to revise upward its growth scenario of +1.4 to +1.5% in 2017 and +1.3 to +1.5% in 2018. “Beyond the trust, the economic program of the President should wear business investment by more of a request, a counter-fiscal shock and public investment plan,” says Ludovic Subran, Chief economist of Euler Hermes. First of all, the substitution of the contributions-employees by an increase of 1.7 percentage point of the CSG, and the exemption from property tax for 80% of the French population should support the demand. Then, the decrease of corporate tax from 33.3% to 25% and decline of 6 percentage points in social contributions employer should boost margins. Finally, the public investment plan of 50 billion EUR, projected over 5 years should just boost the level of 85 billion EUR recorded in 2012. Moreover, the public deficit continues beyond 3% of GDP (3.2% in 2018).
“In the end, business investment is expected to rise to +2.9% in 2017 and +3% in 2018.
Despite the improvement, the gap in investment remains difficult to reabsorb : it amounted to 38 Bn EUR1, compared to 40 billion EUR in 2015. At the current pace, it would take 15 years to close this gap, ” said Ludovic Subran.
1 This gap of investment is based on the difference between the total amount of investments by enterprises in the economy at the end of 2015 and the amount calculated on the basis of an assumption of quarterly growth in investment of 0.7%, similar to the pace of 2006. He was 83 billion if we use 1%, that is, the trend 2000-07 (Barometer Euler Hermes 2015).
According to the barometer, Euler Hermes, the pressure on prices is the major problem of a firm in two, but the fundamentals in the financial system are strengthened
Half of the companies surveyed mention the pressure on prices as the main risk weighing on their profitability. It is in the automotive industry (66%) and construction (55%) than this threat is the most pervasive. They are only 18% cited the lack of activity, against 23% in 2015. Visibility on order books is best. “The average visibility of businesses improved from 5 months in 2015 to 6.4 months in 2017. 35% of French companies believe they have a visibility on their order books, for more than 6 months, so that they were only 24% two years ago “, confirms Stéphane Colliac.
When it comes to capital spending, businesses remain concerned about the opportunities.
For nearly 9 in 10 companies, the outlook for domestic demand or export is an important determinant (or very important) of the change in investment spending (they were 75% in 2015). Then came the renewal of the production tool (54% compared to 73% in 2015), the level of indebtedness of the company (17% compared to 53% in 2015) and financing conditions (16% vs. 47%). These are much improved.
For the companies surveyed, the treasuries were consolidated in 2017 : they are 93% reported having been able to stabilize or improve their cash flow. They do not evoke problems of specific funding, in line with the low current cost of bank financing, and witness to the time of payment rather content to 8 in 10 companies. Euler Hermes estimates that the cash accumulated, available in the treasuries of large enterprises non-financial, expected to reach 355 billion euros in 2016. This remains a very high level, which also increased +3% compared to 2015.
Company 3 is planning to increase its investment spending in 2017 and 1 in 2 will play offensive
With a return request, and of the treasuries strengthened, the French companies testify to the attempts at increasing investment. “In 2017, 2 French companies on 3 will invest at least as much in 2016 (59% in 2015). In the end, 32% of companies plan to increase their investment efforts relative to 2016 “, decrypts Hubert Leman, a Member of the Executive Committee, Euler Hermes France and Director of the Commitments. Only 28% of French companies don’t run at full speed, hence the willingness to invest more to meet the extra demand.
“53% of the surveyed companies prefer an investment offensive : increase of production capacity, launch of a new business, R&D expenditure, external growth operation ; they were half in 2015. The services sectors (65% of investment offensive) and consumer goods (63%) appear to be the most offensive, perhaps because they are forced by the digital revolution “, concludes Ludovic Subran.
N°1 of the credit insurance in France, Euler Hermes France, a subsidiary of the Euler Hermes group, contributes to the profitable growth of business by ensuring their client.
Euler Hermes is the global leader in credit insurance and a recognized specialist in the areas of collection and the guarantor. With over 100 years of experience, Euler Hermes offers a complete range of services for the management of trade receivables. Its international network of monitoring allows to analyze the financial stability of SMES and large groups active in markets representing 92% of global GDP.
Based in Paris, the company is present in more than 50 countries with more than 5,800 employees. Member of the Allianz group, Euler Hermes is listed on NYSE Euronext Paris (ELE.PA). The group is rated AA – by Standard & Poor’s and Dagong Europe. The company has recorded a consolidated turnover of € 2.6 billion in 2016 and guaranteed to 883 billion euros of commercial transactions in the world at the end of 2016. More information: www.eulerhermes.com, LinkedIn or Twitter @eulerhermesFR.
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