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French companies dwarfism (1)

Tuesday 13 March 2012, by Romain Sautard

The French companies dwarfism (1)

With 80 billions € déficit, latest data on French foreign trade are unquestionable: France lacks export companies. Export companies are generally those that have reached a significant size (in terms of employees) and are thus able to compete internationally.
French authorities lay the responsibility of the trade deficit on the lack of MSCs (medium-sized companies, 250 to 2,000 employees) or, in French, ETI (250 to 5.000 employees) but is this lack limited to this size of companies?

France lacks of large companies

INSEE data show that the total number of companies in France is quite similar to the number of companies observed in Germany or United Kingdom (about 3 millions). However, companies distribution by size are quite dissimilar:

Graph 1

Number of companies by size in Germany and United Kingdom compared to France in 2009 (France = 100% for each category)
Graph 1: Number of companies by size in Germany and United Kingdom compared to France in 2009 (France = 100% for each category)
Source: INSEE (France), Destatis (Germany) and ONS (United Kingdom)

This graph highlights what should be called the dwarfism of French companies compared to France’s neighbors. It is obvious that France has a lack of MSCs but the same lack, even higher, for companies with more than 5.000 employees. An investigation performed by IRDEME concluded that it will take almost a century for France to fill this gap because it does not create enough startups and SMEs able to grow and become MSCs, and replace those which disappear.
This handicap between France and other countries will certainly remain as the number of companies with 10 employees or more has only grown by 4,8% from 2002 and 2009 (from 185.569 in 2002 to 196.627 in 2009 ), i.e. the same growth rate than French working age population over the same period .
So why are French Governments always focusing on the lack of MSCs while France simply has a lack of companies with 10 and more employees and is suffering from companies dwarfism?

Conclusion

France is far behind other European countries regarding companies with 10 employees or more and this has a direct impact on French foreign trade and employment. It is important to focus on this dwarfism and find out how to fill the gap with its neighbors. This could be done either by a higher startups birth rate or by the increasing the rate of growth of existing companies. Coming research papers will be devoted to these issues.

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