French firms move 20,000 jobs abroad

With French government prompts to "buy French" to keep the economy buoyant, new statistics revealed on Wednesday that French companies relocating abroad have cost the country 20,000 jobs in the past three years.

French firms move 20,000 jobs abroad
File photo: fdecomite/Flickr

French companies that shift activities abroad do so mainly to both old and new member countries of the European Union, an official report showed on Wednesday.

The report contradicted public perception that a switch to low-wage emerging markets has had a devastating effect on French industry.

Known as "delocalization" in French, the issue is controversial and exerts considerable pressure at election-time, as well as providing a corner-stone of government policy to rejuvenate French industry.

The competitiveness of French manufacturing in particular has fallen badly behind in the past decade, being outpaced notably by companies in Germany. The government has launched several policies to correct the shortfall.

The loss in competitiveness has contributed to a big structural trade deficit, which is dampening the growth of the French economy. 

The negative trend has also triggered a campaign by the French ministry for industrial renewal to encourage consumers to buy products made in France.

The latest data, in a study by the official statistics institute INSEE, also found that during a three-year period the number of jobs lost in non-finance companies and that were attributable to delocalization totalled about 20,000.

To put that number in context, unemployment in France rose by 39,800 job seekers in April alone, reaching a record total of 3.26 million in April, according to labour ministry statistics.

The INSEE survey showed that from 2009 to 2011, 4.2 percent of French companies relocated at least one part of its activity to outside France, but that they primarily turn to EU countries rather than to emerging countries, contrary to commonly-held perception.

Some 38 percent of location switches saw activities end up in one of the 15 original EU members states. These moves were driven by a strategy of reducing non-wage costs and business-friendly legislation, for example the ease of which one can enter into contracts. 

The second biggest destination for these relocations was African nations, which accounted for 24 percent, with the most recent members of the European Union accounting for 22 percent, China 18 percent and India 18 percent.

INSEE said that its study on global chains of activity showed that "jobs cut in France directly because of delocalization carried out between 2009 and 2011 by commercial, non-financial companies employing more than 50 people is about 20,000 or about 6,600 job cuts per year over these three years."

The manufacturing industry, information and communication services were the most common among companies who had relocated abroad, INSEE said.

These companies were usually involved in exports, or were already operating abroad through subsidiaries.

Relocating to emerging countries such as India and China was often motivated by low costs, wage-related and otherwise, and by access to developing markets. INSEE said that lower wage overheads could also make new EU members attractive as a place to do business. 

The French government remains under great political pressure at home to raise the performance of the economy, which fell into recession in the first quarter, and to start combating record unemployment.

It is also under pressure at EU level to make quick progress with structural reforms to control public budget deficits and raise efficiency in the economy.

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