Investment and Investment Finance in France Natacha Valla Head of - PowerPoint PPT Presentation

Investment and Investment Finance in France Natacha Valla Head of Policy and Strategy Division Economics Department European Investment Bank “Investment in France: gearing up momentum” Banque de France, May 3, 2018 27/04/2018 1

Since 2015, the investment recovery is driven by the private sector, especially non-financial companies and IPP investment Real investment by sector Real Investment by asset Cumulative change relative to 1Q08 Cumulative change relative to 1Q08 6.0% 8.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% -2.0% -4.0% -4.0% -6.0% -6.0% -8.0% -8.0% -10.0% -10.0% -12.0% -12.0% -14.0% -14.0% 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 Financial corporations Government Bio resources Dwellings Households and NPISH Non-financial corporations IPP Machinery and equipment Total Other buildings and structures Total Note: Cumulative change of quarterly real investment relative to the 1Q08 Note: Cumulative change of quarterly real investment relative to the 1Q08 level, with sector-level contributions. level, with asset class contribution. Source: Econ calculations, Eurostat Source: Econ calculations, Eurostat, national authorities 27/04/2018 European Investment Bank Group 2

Infrastructure investment has been falling rapidly since 2013, due to lower government investment Infrastructure investment, occupational Infrastructure Investment, institutional per cent of GDP per cent of GDP 2 2 1.5 1.5 1 1 0.5 0.5 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utilities Transport Communication Education Health Government Corporate PPP Non-PPP Proejct Note: Annual infrastructure investment as a share of GDP, broken down Note: Annual infrastructure investment as a share of GDP, broken down by occupational sector. by institutional sector. Source: Econ calculations, Eurostat, national authorities Source: Econ calculations, Eurostat, national authorities 27/04/2018 European Investment Bank Group 3

What can 12,500 firms in Europe, of which 600 in France, can tell us about recent investment trends? EIB investment survey: • 12,483 firms surveyed across EU28 (of which 602 in France) • Non-financial corporations with 5+ employees in manufacturing, services, construction and infrastructure sectors • Information on: • Firm characteristics and performance • Investment needs and constraints • Past investment activities and future focus • Investment finance • Representative of the economy (firms weighted by value-added) • Data collected from April-July 2017 27/04/2018 European Investment Bank Group 4

Investment activity is picking up, driven by the strong performance of the manufacturing sector Investment cycle 30% Low investment expanding High investment expanding Man Firms expecting to increase/decrease investment in 25% HR HU current financial year (net balance,%) 20% LT AT CY DE SK PT NL 15% PL SI BE EE LU IT EU CZ 10% LV FI DK SE SME UK FR ES BG 5% Large MT Infr GR 0% IE RO Constr -5% -10% Serv Low investment contracting High investment contracting -15% 60% 65% 70% 75% 80% 85% 90% 95% 100% 105% Share of firms investing Note: Plots the share of firms with investment expanding/contracting relative to the share of firms investing, by sector or Member State; cross centred on EU average. Source: Econ EIBIS 27/04/2018 European Investment Bank Group 5

Looking ahead to the next three years, the main investment priority is replacement, followed by developing new products, processes or services Purpose of previous year's investment Future investment priorities share of total investment share of total investment 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% EU 2016 EU 2017 FR 2016 FR 2017 Manufacturing Construction Services Infrastructure SME Large EU 2016 EU 2017 FR 2016 FR 2017 Manufacturing Construction Services Infrastructure SME Large Capacity expansion Replacement New products/services Other Capacity expansion Replacement New products No investment planned Note: Average response, in per cent. Q. What proportion of total investment was for (a) Note: Share of firms by main purpose of investment, in per cent. Q. Looking ahead to the replacing capacity (including existing buildings, machinery, equipment, IT) (b) expanding next 3 years, which is your investment priority (a) replacing existing buildings, machinery, capacity for existing products/services (c) developing or introducing new products, equipment, IT; (b) expanding capacity for existing products/services; (c) developing or processes, services? introducing new products, processes, services? Source: Econ EIBIS Source: Econ EIBIS 27/04/2018 European Investment Bank Group 6

Machinery and equipment remains the main investment area for firms and the share allocated to employee training is higher than the EU average Areas of investment Innovation activity average share allocated average share allocated 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% EU 2016 EU 2017 FR 2016 FR 2017 Manufacturing Construction Services Infrastructure SME Large 0% EU 2016 EU 2017 FR 2016 FR 2017 Manufacturing Construction Services Infrastructure SME Large Land, business buildings and infrastructure Machinery and equipment R&D Software, data, IT, website No Innovation New to the Company Training of employees Organisation/business processes New to the Country New to the World Note: Average of responses for allocations by area in per cent: Q. In the last financial year, Note: Average of responses in per cent: Q. What proportion of total investment was for how much did your business invest in each of the following with the intention of maintaining developing or introducing new products, processes, services? Q. Were the products, or increasing your company’s future earnings? processes or services new to the company, new to the country, new to the global market? Source: Econ EIBIS Source: Econ EIBIS 27/04/2018 European Investment Bank Group 7

The average share of the capital stock that is reported to be of high quality is lower in France than in most EU countries State-of-the-art machinery and equipment Share of high energy efficiency buildings average share average share 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% AT DE HU LU IT ES FI IE SI SE NL LV MT EE LT BE HR DK PT RO UK SK FR PL BG CZ ES HU HR NL EE LT AT DE IE SI MT PT IT LU DK BE BG SK UK LV CZ RO SE PL FI FR State-of-the-art machinery and equipment 2016 High energy efficiency standards 2016 Note: Average of responses in per cent: Q. What proportion, if any, of Note: Average of responses in per cent: Q. What proportion, if any, of your machinery and equipment, including ICT, would you say is state-of- your commercial building stock satisfies high or highest energy efficiency the-art? standards? Source: Econ EIBIS Source: Econ EIBIS 27/04/2018 European Investment Bank Group 8

Manufacturing firms are most likely to have invested too little over the past 3 years, while firms in infrastructure least likely Capacity utilisation (EIBIS) Perceived investment gap average share at or above capacity share of firms 60% EU 2016 50% EU 2017 FR 2016 40% FR 2017 30% Manufacturing 20% Construction 10% Services Infrastructure 0% EU EU Manufacturing FR Manufacturing Construction Services Infrastructure SME Large SME Large 0% 20% 40% 60% 80% 100% Invested too much About the right amount 2017 2016 Invested too little Don't Know/refused Note: Average share of responses in per cent: Q. In the last financial year, Note: Share of responses in per cent: Q. Looking back at your investment was your company operating above or at maximum capacity attainable over the last 3 years, was it too much, too little, or about the right amount? under normal circumstances? Source: Econ EIBIS Source: Econ EIBIS 27/04/2018 European Investment Bank Group 9