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White Clarke Group

White Clarke Group is the market leader in software solutions and business consultancy to the automotive and asset finance sector for retail, fleet and wholesale. White Clarke Group solutions enable end-to-end credit processing and administration to streamline business practice, cut operational cost and deliver outstanding customer service. White Clarke Group has a twenty-two year track record of leadership and innovation in finance technology, consultancy and new market entry. Clients value White Clarke Group's industry knowledge, market intelligence and innovation. The company employs some 500 finance and technology professionals, with offices in the UK, USA, Canada, China, Australia, Austria and Germany.

White Clarke Group publish the Global Leasing Report, which is part of The World Leasing Yearbook. To download a copy please go to: http://www.whiteclarkegroup.com/knowledge-centre/category/global_leasing_ report


Ralf Behrning, vice president sales, CHG-MERIDIAN Computer Finance France; Pierre-François Degand, Associate, Invigors France;

Thierry Fautré, chief executive officer, the Commercial Finance Unit of Siemens Financial Services France;

Jean-François Gervais, deputy managing director, BNP Paribas Leasing Solutions; Bertrand Girerd, independent financial services consultant;

Bruno Leray, general manager, De Lage Landen France / Athlon Car Lease France; Jean-Luc Martin, director general, MAN Financial Services SAS;

Marc Meriemkouli, international account manager, Fleet Logistics; Robert Paine, program manager, White Clarke Group;

Laurence Toxé, Partner (tax), Norton Rose Fulbright LLP; Michael Vander, independent financial services consultant.

http://www.whiteclarkegroup.com/ http://www.assetfinanceinternational.com Publisher: Edward Peck

Editor: Brian Rogerson Author: Nigel Carn

Asset Finance International Ltd.

39 Manor Way, London SE3 9XG UNITED KINGDOM

Telephone: +44 (0) 207 617 7830

© Asset Finance International, 2014, All rights reserved No part of this publication may be reproduced or used in any form or by any means – graphic; electronic; or mechanical, including photocopying, recording, taping or information storage and retrieval systems – without the written permission from the publishers.





France at a glance


The French leasing market


Recent trends


Asset finance market forecasts


The French economy


Revitalizing the economy


Business confidence


Business climate


Competitiveness 17

Stage of development


Outlook and forecasts


Leaders’ insights


The current economic climate


Performance of the leasing market


What is going to drive the markets


What will be the challenges


Market prospects


The ‘green’ market


SMEs – the challenge of raising capital


Opportunities for foreign investors


Opportunities to expand into France


Merger and acquisition scenarios


Taxation and accounting issues


French tax issues regarding equipment leasing


Introduction 34

Tax and accounting principles


Lease classification


Deduction of lease payments


Local taxes




France at a glance

This Asset Finance International country survey aims to provide a balanced assessment of the equipment and auto finance and leasing market in France. Key areas covered and principal findings include:

The French asset finance industry, like the economy, is performing well below expectations. New asset finance business volumes

have declined in recent years and are currently no better than stagnant.

However, figures from the leasing association – the ASF – for the first quarter of 2014 show that some sectors are starting to recover,

notably hire purchase of equipment and passenger car leasing.

In the auto sector, data provided by the vehicle leasing association – the SNLVLD – show a continuing long-term decline. In the final quarter of 2013, there was growth in both the personal and corporate segments compared with the same period a year earlier, although figures for the full year declined for both segments.

Industry forecasts are for muted growth in asset finance, with the captive / vendor sector having the best outlook for the coming year. Market sectors posted for growth include commercial vehicles, IT, healthcare and construction.

Meanwhile, the French economy, despite being the second largest in the eurozone and remaining one of the largest and most developed globally, has been declining in competitiveness. Investment has duly fallen, GDP is stagnant, and unemployment levels remain stubbornly high. The traditional protection provided by the state has tended to restrain growth.


The government has made clear its intention to create a more business- and investment-friendly environment to assist small and medium-sized enterprises (SMEs) in accessing capital and to reduce the burden of taxation and administrative red tape. Interestingly, recent data from the Banque de France show an increase in demand for credit from SMEs, counter to the prevailing trend.

Fears of economic stagnation have reappeared across the eurozone, forcing the European Central Bank (ECB) to cut its benchmark interest not once but twice, and to announce a stimulus package involving the purchase of debt products from banks in a form of quantitative easing.

However, business confidence is at a low in France, notably in the manufacturing sector. One burden that impacts all businesses and especially SMEs is the high level of taxation and bureaucracy.

The international image of France as a place to do business has been negatively affected by the slowness of reform of administrative processes and the labour market, which affect competitiveness, although progress is being made and the economy retains its underlying strengths and advantages.

Predictions for the French economy are for subdued growth for some time, with forecasters stressing the need for increased competitiveness – although this will be hard to maintain whilst cutting both taxation and spending.

A number of industry leaders have provided unique insights into the state of the market for this survey. Comments cover a multitude of topics, including the importance of captive lessors and the

lack of confidence which affects investment levels and therefore competitiveness.

The experts also give their opinions on which sectors in a slow market have the best prospects for growth in the near and medium terms, assess the reasons for the decline in foreign investment and its importance to French businesses, and examine the openings for overseas asset finance companies looking to expand into France – a difficult situation in a market dominated by well-established institutions, but with possibilities for niche operators.

Views are also supplied on the position in France regarding the

proposed changes to international accounting standards, as well as on the impact of tax regulation on leasing. This subject is also covered in detail by a local expert, in a special article that provides clarification on the unique features of the French system.


The French leasing market

The asset finance industry in France is represented by the Association Française des Sociétés Financières (ASF). All French leasing companies are members of the ASF; however, the ASF covers a wider range of finance operations than just leasing, including consumer credit, factoring, house finance, guarantees and investment services firms. The ASF has recently passed its 30th anniversary, having been established under the regulatory framework of the Banking Act of 24 January 1984. Leasing in France is highly regulated, and membership of the association is necessary to comply with the regulatory environment. In addition, the vehicle leasing market in France is represented by the Fédération Nationale des Loueurs de Véhicules (FNLV), which was established in 1976 and now has a total membership of 295 companies involved in private and commercial vehicle rental, and fleet leasing. One of the groups that make up the FNLV is the Syndicat National des Loueurs de Voitures en Longue Durée (SNLVLD), founded in 1978, which represents commercial companies that engage in the long-term rental of passenger cars and commercial vehicles in France. SNLVLD members represent 97% of the sector’s activity.

According to the latest rankings released by Leaseurope, in terms of new business volume in 2013, out of a total of 62 parent or stand-alone companies, French lessors held the following positions:

1. Société Générale Leasing Solutions (including ALD Automotive);

2. BNP Paribas Leasing Solutions (including Arval); 11. Crédit Agricole Leasing and Factoring;

12. CM-CIC Leasing; 15. RCI Banque; 17. Natixis Lease.

However, despite the size and importance of its main players, the market in France, like the overall economy, has been in the doldrums. It is one of the world’s largest and most mature, with a relatively high penetration level, and plays an extremely important role in business equipment finance, but it has been declining in terms of new business volumes (NBV) since 2011.

All markets have suffered turbulent times since the financial crisis, but France is performing poorly, particularly when compared to markets in the leading developed economies amongst which it would expect to be placed. The eurozone is still undeniably fragile, but the German market has at least stayed level since 2011, and in the UK and the US the markets are moving ahead with increasing confidence.


Recent trends

According to ASF data, in 2011 French leasing NBV stood at €22.3bn (equivalent to US$31.0bn at an average annual exchange rate of €1:$1.39), which was an encouraging increase of 12.2% over 2010. However, in 2012 this total fell 0.3%, and the decline continued in 2013, dropping a further 3.4% to €21.5bn (equivalent to US$28.6bn at an average annual exchange rate of €1:$1.33). As the ASF stated in its 2013 report, “A virtual stagnation in 2012 was succeeded in 2013 by a further decline in activity for specialized equipment rental financing companies and professionals providing finance lease and related operations, ending − at least temporarily – the possibility of a rebound that had been indicated in 2011.” By contrast, ASF members increased their provision of standard loan finance to businesses to €3.2bn (US$4.25bn) in 2013, a rise of 28.9% over the previous year. Leasing NBV, 2010–2013 (€m)

Source: ASF

Equipment leasing is divided into two main areas: Leasing With Option to Purchase (LWOP), which is essentially rental, the bulk of which is the equivalent of hire purchase; and Leasing Without Option to Purchase. LWOP volumes stood at €12bn (US$16bn), or 56% of the total leasing market funded by ASF members in 2013, a drop of 2.3% from 2012, although this segment declined by less than the 4.9% suffered by the Leasing Without Option to Purchase segment. Only two equipment sectors showed an increase in NBV in 2013: Commercial vehicles and trucks (LWOP segment), and ‘other equipment’ in the ‘without option’ segment. 23,000 22,500 22,000 21,500 21,000 20,500 20,000 19,500 19,000 18,500 2010 2011 2012 2013


Equipment leasing in France, 2013 vs 2012 2013 (€m) 2012 (€m) Change (%)

Leasing with option to purchase (LWOP) 12,020 12,297 -2.3

Hire purchase of equipment 10,139 10,338 -1.9

Commercial vehicles and trucks 4,193 4,075 2.9

Business equipment 581 620 -6.2

Office equipment 171 199 -14.1

Computers 410 421 -2.5

Other equipment (machine tools, agricultural) 5,364 5,643 -4.9

Other LWOP activity (private passenger cars) 1,881 1,959 -4.0

Leasing without option to purchase 9,476 9,965 -4.9

Financed leasing 5,104 5,484 -6.9

Commercial vehicles and trucks 742 779 -4.7

Passenger cars 204 248 -17.8

Business equipment 2,615 2,950 -11.4

Office equipment 1,205 1,396 -13.7

Computers 1,410 1,554 -9.2

Other equipment (machine tools, agricultural) 1,542 1,507 2.4

Long-term rental (all vehicles, inc. passenger cars and commercial vehicles)

4,372 4,481 -2.4

Total 21,496 22,263 -3.4

Source: ASF

However, there are signs that the market may be stabilizing and that the decline at least has been arrested in the first quarter of 2014, with an overall increase in NBV to €4.9bn (equivalent to US$6.7bn at an average exchange rate for the quarter of €1:$1.37), a rise of 1.3% over the same period in 2013. Hire purchase showed the biggest rise in financial terms, but passenger cars grew by the greatest degree (9.7%). Equipment leasing in France,

Q1 2014 vs Q1 2013 Q1 2014 (€m) Q1 2013 (€m) Change (%)

Leasing with option to purchase (LWOP) 2,778 2,692 3.2

Hire purchase of equipment 2,336 2,289 2.1

Other LWOP activity (private passenger cars) 442 403 9.7

Leasing without option to purchase 2,175 2,196 -1.0

Financed leasing 1,173 1,200 -2.3

Long-term rental 1,003 996 0.6

Total 4,953 4,888 1.3


Auto sector

The auto leasing market in France, including the important long-term rental segment, tends to fluctuate through the year, but there has been a consistent decline in recent years.

Looking at the auto market as a whole, the latest data available from the SNLVLD shows there were 577,000 new light vehicle registrations in Q4 2013 − an increase of 2.9% on Q4 2012. The SNLVLD defines light vehicles (LVs) as passenger cars (PCs) and light commercial vehicles (LCVs). The Q4 volume marked the reversal of a downward trend compared with the same quarter of the previous year that had been running since Q1 2011. Moreover, this upswing marked a surge of 29% over Q3 2013, although it was not enough to affect the full-year comparison, which declined 5.4% against 2012. In fact, total registrations of 2,121,000 vehicles amounted to the lowest annual total since 1998. A breakdown of the Q4 2013 new registrations data shows a total for PCs of 477,000, representing an increase of 2.7% on the same quarter in 2012, while the LCV market rose 3.5% to 100,000. However, for 2013 as a whole, PC registrations fell by 5.6% and LCVs by 4.3% compared to the previous year.

In Q4 2013, the overall ‘household’ (personal) market grew by 4.6% on a year-on-year basis. Growth in the ‘non-household’ (corporate) market was weaker, at +1.3% on a year-on-year basis, but at least this marked an uptick. For the full year 2013, however, registrations in both customer categories fell, with the household market dropping more sharply (-7.6%) than the non-household market (-3.4%).

By sector, the non-household PC market posted more modest growth in Q4 of 0.4%, after year-on-year growth of 3.4% in Q3. For 2013 as a whole, the market fell by 3.1%, with the short-term rental market being the worst hit, down -14.3% in Q4 2013 and -11.6% for the full year. The corporate fleet channel (own purchases and long-term rentals) grew by 8.5% in Q4 2013, but still registered a small drop for the full year 2013 (-0.6%).

New business in the non-household LCV market showed a recovery of 3.1% in Q4 2013, on a year-on-year basis; however, for the full year, this market fell by 4.1%. The corporate fleet channel continued to decline, dropping by 1.8% versus Q4 2012. This channel’s share of the total LCV market fell by 1 percentage point over 2013 as a whole, and ended at 82%.

In the long-term rental market, in Q4 2013, new LV registrations fell by 4.4% versus Q4 2012, marking the seventh consecutive decline when compared with the same quarter a year earlier, and the worst end-of-year result since Q4 2010. For the full end-of-year 2013, LV registrations fell by 5.6% on a year-on-year basis. As a result, the share of long-term rentals in corporate fleet registrations fell to 59% in total for 2013 versus 61% in 2012.

In Q4 2013, the total long-term rental stock of PCs, LCVs and company cars on the road fell slightly (-0.3%) to 1,175,296 units compared with Q3 2013, but this total represented an increase of 1.2% on Q4 2012. The number of vehicles under fleet management grew steadily throughout 2013, totalling 265,124 units at the year end, an increase of 3.4% since the beginning of the year.


Alternative fuel vehicles at present form a minor part of the long-term rental market. Figures supplied by rental firms show that long-term rentals represented less than 20% of new registrations in Q4 2013, a slightly lower proportion than in the previous quarter, but this was of a total new business volume of just 17,000 units.


Source: SNLVLD, data processed by BIPE

On a general note, the European Automobile Manufacturers’

Association (ACEA) provides some slightly encouraging data for new vehicle registrations in France. For passenger car registrations in the first half of 2014, the French market increased by 2.9%, albeit at the lower end of growth rates compared with other main EU markets. For commercial vehicle registrations in H1 2014, although the other large EU markets rose substantially, the French market at least remained stable, and in June actually posted a rise of 6.5% (all accounted for by LCVs).


Asset finance market forecasts

Asset Finance International asked industry experts at a cross-section of major lessors for their market predictions for the coming year. Further comments regarding growth prospects appear in the later ‘Leaders insights’ section of this survey.

Respondents were none too optimistic, understandably, given the macro situation in France and current global uncertainty, but there were some positive indicators. Regarding the prospects for the leasing industry overall, the unanimous view was that there would be growth, but, as with the economy, this would be muted. Forecasts averaged out at slightly better than for the general economy, but still ranged broadly between 1% and 5%. Predictions improved for the captive / vendor sector, at around 5% on average, with the upper end going boldly into double-digit territory.

Opinion varied as to whether the outlook is brighter for SMEs or larger corporates. For some, the lacklustre economic climate means the immediate prospects are limited for both market segments; others favoured SMEs for their flexibility and adaptability, and because larger firms are having to run efficiency programmes and make savings; and another group backed larger corporates because their international exposure should shield them from weak domestic growth. However, the average forecast growth rate for both segments is only in the low single digits. Whatever their size, as one interviewee pointed out, if a business is to perform well it needs a sustainable and reliable financing strategy that will allow the necessary investment without putting its budget under undue pressure.

Few specific leasing sectors were highlighted for growth. In the auto segment, commercial vehicles were favoured over passenger cars, although growth in both areas is expected to be slow. In the equipment segment, the sectors most often selected were IT and healthcare, owing to developments in technology, and construction, which is recovering from a difficult year in 2013. However, forecasts for these sectors ranged no higher than the upper single digits. In all equipment sectors there will, of course, be a pent-up need for replacement and renewal, which can only increase with time.


Comparison of GDP growth (%)

Sources: INSEE France, Eurostat, German Federal Statistics Bureau, UK Office for National Statistics

The French economy

France is a top-five global economy by nominal GDP and even when GDP is measured by purchasing power parity (PPP) it is still firmly within the top 10 in the world. It is the second largest economy in the euro area and, as a founding partner of the EU, France has relished its influence in the world’s largest trade group.

However, in recent years, its competitiveness has declined and private investment has become harder to attract, partly due to rigid labour laws and a system of high taxes and social contributions. Combined with reduced levels of innovation, these factors have led to a gradual decline in its export-oriented industrial base, stagnating GDP and a level of unemployment that has been stuck at around 10%.

Nevertheless, over the past two years, stock market performance measured by the CAC 40, the benchmark index that tracks the performance of a select 40 companies traded on the NYSE Euronext Paris, has been generally positive. Since the recent low of around 3,000 in mid-2012, the trajectory has been fairly consistently upward, reaching nearly 4,600 in early June 2014. However, it has had one of its regular stutters since, falling back due to fears across Europe of the effect of tit-for-tat sanctions over Ukraine.

Like all developed economies, France was hit by the global recession, but the slowdown was initially eased by France having a more cautious banking and investment sector. France is also a world leader when it comes to the proportion of the labour force working in public sector jobs, most of which were protected from the worst of the economic downturn. The other substantial cushion against the recession has been the tradition of state intervention in the economy. While other governments have begun to offload investments in strategic areas as the global economy starts to pick up, the situation has, if anything, increased in France, with further instances of the state stepping in to preserve French-owned assets and French jobs.

However, despite the undisputed strengths of the French economy, not least of which are its size and the number of world-leading French companies, it has not begun to pull out of recession like the majority of its EU partners. State intervention has provided as much of a brake as stimulus, and the economy is stuck in the doldrums.

France Euro Area UK Germany 1 0.8 0.6 0.4 0.2 0 -0.2 -0.4 -0.6 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011


Comparison of unemployment rates (%)

Sources: Eurostat, YCharts, UK Office for National Statistics, German Federal Statistics Bureau

Jul-14 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

14 12 10 8 6 4 2 0 Euro Area France UK Germany

Revitalizing the economy

On the plus side, the government has stated its intention to develop a more dynamic investment policy, one element of which has been the establishment of Bpifrance, a financial institution working through a decentralised network of 37 regional offices, whose stated mission is to “provide assistance and financial support to small and medium-sized enterprises (SMEs), facilitating access to banks and equity capital investors, in particular during the high-risk phases: start-up, innovation, development, international, buyout.”

And in its August 2014 monthly lending survey, the Banque de France (BDF) revealed that banks reported an increase in demand for credit by SMEs for the second consecutive month in July, the first time this has happened since mid-2011. Over the 12 months prior to this, credit demand from SMEs had been largely on the decline, while demand from larger corporations has been fairly stable.

Change in demand for credit, July 2013−July 2014 (%)

Source: Banque de France

100 80 60 40 20 0 -20 -40 -60 -80 -100 100 80 60 40 20 0 -20 -40 -60 -80 -100 May 2014 Apr 2014 Mar 2014 Feb 2014 Jan 2014 Dec 2013 Nov 2013 Oct 2013 Sep 2013 Aug 2013 July 2013 June 2014 July 2014

SME Larger corporations

+ Increase


It should be noted that, in an effort to counter deflation, as figures showed eurozone inflation continuing to fall well below its stated ‘danger zone’ of 1%, the European Central Bank (ECB) cut its base interest rate in early June to a new low of 0.15%, with the deposit rate actually dropping below zero – meaning banks would pay interest on deposits for the first time. More surprising, the ECB shaved the rate further in early September to 0.05% as the latest flash estimate for inflation had dropped to just 0.3%. The policy aim is to curb upward pressure on the euro, which has contributed to such low inflation, and to push cash-rich banks to increase lending with what is effectively a tax on failing to do so.

In May, the ECB also announced the provision of €400bn (US$545bn) in cheap loans to banks to further aid lending, although concerns were voiced as to how much that would encourage lending to French companies. Potentially better news followed the September rate cut, when ECB president Mario Draghi announced the launch of what many had been waiting for – a version of quantitative easing involving the purchase of asset-backed securities – somewhat later than economies such as the US and UK, which have been seeing the benefits.

A dramatic turn of events came at the end of August, following a period of yet more gloomy predictions, when President François Hollande was forced to reshuffle his cabinet after left-wing Economy Minister Arnaud Montebourg criticised the country’s economic direction. Former banker Emmanuel Macron, a much more centrist politician, was appointed in his place to push through Hollande’s proposals to curb business taxes and cut the volume of red tape in the effort to save the economy from stagnating further.

This could make sense for economic policymaking in introducing a more moderate team, thereby avoiding the need to try to placate the more hard-line pro- or anti-austerity elements on either side, but may prove politically risky as it could alienate even further Hollande’s already disaffected core socialist support.

Business confidence

Meanwhile, business conditions in the French manufacturing sector continue to be uninspiring. The headline Purchasing Managers’ Index (PMI) for manufacturing in France produced by financial information services firm Markit dropped to 46.9 in August − its fifth consecutive fall and the lowest reading since May 2013, having only briefly showed signs of climbing out of a prolonged period of contraction by going above 50 in March and April. The Services PMI has indicated a recent increase in activity, but not enough to counter the depressed state of manufacturing output.

Although surveyed earlier in the year, there is better news to be found in the latest GE Capital Capex Barometer. This specifically assesses the SME sector and, for Q1 2014, reported that business confidence in France regarding the year ahead had increased to 23% from 4% in the same period in 2013, with total planned investment by French SMEs for the coming year up 41% to €90bn. However, these readings were taken after a positive end to 2013 and a stable first quarter, prior to the more recent downturn and the latest worries over East-West tension. A particular issue for French SMEs is high tax burdens. Measures introduced by successive governments to counter the taxation downside have tended to merely introduce extra problems in the form


of added administrative bureaucracy, when what SMEs want is greater simplification of the process.

This high level of corporate taxation also encourages offshoring of jobs and manufacturing, and discourages job creation by SMEs and the formation of start-ups. A further problem exacerbated by this has been reduced competitiveness of French business in the international market.

Business climate

As mentioned, bureaucracy is an ever-present burden, and due to its size and complexity the French economy suffers from a build-up of regulation that can hinder business operations. The World Bank (WB) report Doing Business 2014 places France in 38th position in its global ranking of the ease of conducting operations, a drop of three places on 2013.

Doing Business 2014 reports on the ease of doing business in 189 countries in the year 2012-13. The WB’s quantitative indicators concerning regulation give a profile of the business environment and allow useful comparison with other selected economies, as well as against the ‘regional average’. The nearer a country is to number one in the ranking, the more conducive the regulatory environment is to operating a business.

How France and comparator economies rank on the ease of doing business

Source: Doing Business database



United Kingdom Germany Switzerland Regional Average (OECD high income) Belgium France Spain Italy

1 189

Ease of doing business ranking

21 36 65 29 38 52


Topics where greatest progress has been made include getting credit, cross-border trading and property registration. However, France is still a little below the regional average of high-income Organisation for Economic Cooperation and Development (OECD) countries for the ease of getting credit, and a good deal below average for the ease of registering property. France is above average for the ease of starting a business, and considerably ahead of Germany on this measure, although behind the UK.

How France ranks on Doing Business topics

Source: Doing Business database

Protecting investors (80) Starting a business (41)

Dealing with construction permits (92)

Getting electricity (42)

Registering property (149)

Getting credit (55) Resolving insolvency (46)

Enforcing contracts (7)

Trading across borders (36)

Paying taxes (52)


In the World Competitiveness Rankings published in May 2014 by the Swiss-based IMD business school, France climbs one place to 27th out of the 60 main economies reviewed. The survey asks business executives to assess the current situation in their own country, and as the IMD noted: “In general there is a strong correlation between a country’s overall competitiveness ranking and its international image as a place to do business.”

Several European countries have risen in the rankings as, at that point, Europe seemed to be starting to haul itself out of recession. For most of these countries, the perception of their image abroad was also improving; however, France has a problem here, as it sinks to a lowly 50th ranking, on which the IMD comments: “Perceptions of France continue to be coloured by slow reforms and the country’s negative attitudes toward globalization.”

In the more comprehensive Global Competitiveness Report produced annually by the World Economic Forum (WEF), France retains its 23rd position out of a total of 144 countries for 2014-15, after dropping back for four consecutive years. The report states: “The government has promised a ‘competitiveness shock’ and is considering a number of business-friendly measures, including a simplification of administrative procedures, in order to revive growth and reduce the country’s stubbornly high level of unemployment.”


There has been marked improvement in the labour market “black spot” (climbing 10 places to 61st), although the other area of major concern, the fiscal situation, continues to deteriorate (ranked 82nd, down nine). The report notes the country retains a number of clear competitive advantages, including world-leading infrastructure, strength in the quality and quantity of education at all levels, a highly professional and sophisticated business culture (22nd), and a high degree of technological adoption (17th). It concludes that these strengths

“contribute to creating a relatively conducive ecosystem for innovation (19th),” but adds, “However, on this dimension, France trails Germany, the UK and the Scandinavian countries by a significant margin.” France’s position in the Global Competitiveness Index

Source: Global Competitiveness Report 2014-2015, World Economic Forum, Switzerland Rank (out of 144) S(1–7)core GCI 2014–2015 23 5.1 GCI 2013–2014 (out of 148) 23 5.1 GCI 2012–2013 (out of 144) 21 5.1 GCI 2011–2012 (out of 142) 18 5.1 Basic requirements (20.0%) 26 5.4 Institutions 32 4.7 Infrastructure 8 6.0 Macroeconomic environment 82 4.6 Health and primary education 18 6.4 Efficiency enhancers (50.0%) 19 5.1 Higher education and training 28 5.3 Godds market efficiency 46 4.6 Labour market efficiency 61 4.3 Financial market development 23 4.8 Technological readiness 17 5.8 Market size 8 5.7 Innovation and sophistication (30.0%) 19 4.9 Business sophistication 22 5.0 Innovation 19 4.7

1 Transition1–2 2 Transition 3

2–3 Stage of development

France Advanced economies Institutions Infrastructure Macroeconomic environment Health and primary education Higher education and training Goods market efficiency Labor market efficiency Financial market development Technological readiness Market size Business sophistication Innovation Efficiency

driven Innovation driven Factor driven 7 6 5 4 3 2 1

Most countries have one region that is notably high-performing and highly competitive, most often the capital region. The European Commission’s most recent Regional Competitiveness Index (RCI) for 2013 shows a particularly wide gap between the capital region in France and the second most competitive region – a situation that can be counterproductive in terms of national competitiveness.


Outlook and forecasts

Forecasts for the French economy are for growth, but at a level not far north of actual stagnation. The OECD predicts a rate of 0.9% for 2014, rising to 1.5% in 2015. This compares with projected growth for the same periods of 1.2% and 1.7% for the euro area, an economic group that France, or at least her politicians, would normally expect to be leading. In its Economic forecast summary for May 2014, the OECD noted: “The announced cuts in business taxes and social contributions, which add to the recently introduced corporate tax credit (CICE), should promote employment and investment and boost the competitiveness of French firms, thus supporting activity in both the short and longer term. However, these measures need to be financed by significant spending restraint, including planned reductions in inefficient government spending.” Likewise, the Economist Intelligence Unit (EIU) predicts only “subdued” real GDP growth, of 0.5% in 2014, and average annual growth rates of only 1.1% for the period 2013-2020 and 1.8% for the following decade. The EIU summed up this longer-term outlook with the comment: “France’s trend rate of GDP growth is set to remain under 2% per year, as the working-age population starts to stagnate from the next decade onwards. With the economy likely to continue suffering from high

unemployment and relatively short working hours, the growth outlook will hinge on France’s ability to raise its rate of productivity growth, which has slowed in recent years.”


Leaders’ insights

In order to provide as full and rounded view as possible of the equipment and auto leasing market in France, Asset Finance

International sought the opinions of a range of industry experts on the state of the market, the opportunities and challenges it faces in the coming year, and the likely trends and medium-term outlook. It is interesting that, with one notable exception, the main French banks and their captive subsidiaries declined to comment – their reticence displaying perhaps a lack of short-term confidence in the market and concerns for the economy overall. State involvement in the industry association (the ASF) means that direct comment from there is restricted to official releases. However, the size and potential of the French leasing market is of great interest on a broader, certainly pan-European, front – a fact that is illustrated by the wealth of comment from non-domestic companies.

The current economic climate

The latest economic statistics for the eurozone do not make pleasant reading, with stagnation looking ever more likely as Q2 2014 GDP growth for the whole area returned to zero. France remained on no growth for a second successive quarter, German GDP actually shrank compared to the previous quarter, and Italy returned to recession – these three economies account for around two-thirds of eurozone output – and although the figure for Germany represents an unwelcome correction following better than expected Q1 data, and it is confidently expected to return to growth in the second half, the signs across the region are of lack of reliable momentum. With eurozone inflation falling, and its domestic consumer prices following suit, France faces a real danger of deflation.

The first question for the industry experts concerned recommendations to stimulate economic growth in France. There was a general

consensus that investment would benefit greatly from reduced taxes, reduced public expenditure, lower costs and a more business friendly environment. Commenting specifically on taxation, Jean-François Gervais, deputy managing director of BNP Paribas Leasing Solutions, stated: “For the leasing industry, a major tax advantage for investments would help in increasing our new business volumes, as well as ensuring a bigger flexibility in labour regulations and a decrease in labour costs.”

This point was also made by Thierry Fautré, chief executive officer of the Commercial Finance Unit of Siemens Financial Services France, who said: “With the French recovery still lagging behind some other European countries, government incentive programmes, as well as favourable regulations for the industry and energy efficiency sectors, will prove particularly crucial in encouraging business investment.”

Jean-François Gervais


Another side to the tax coin was introduced by Ralf Behrning, vice president of sales, CHG-MERIDIAN Computer Finance France. He agreed that the most pressing need was to bring down the high level of contributions and taxes on companies, which is hampering not only investment but also employment, but added the need to reduce high levels of personal tax, “So business leaders do not think about how to avoid taxes and move to other countries, but think about their future within France.”

Apart from taxation, there was widespread agreement that a key consideration is the need to overhaul various systems and structures. An overview was provided by Bertrand Girerd and Michael Vander, independent financial services consultants and cross-border project partners with respective expertise in French and German business. Speaking from wide experience, they commented: “When you talk with company managers, they are on average pessimistic and looking for more clarity for the future, especially small and medium-sized companies. Key items are taxes and social organization. Entrepreneurs are looking forward to seeing tax cuts and relief of social costs and constraints.”

Ralf Behrning said that France would probably benefit from changes to the generous social system, and suggested the German ‘Agenda 2010’ as a model – this proposed radical reforms of the tax, pensions and social security regimes. Behrning added that a realignment of the education system was needed, as it tends to stifle entrepreneurship, stating: “France still holds onto its elite system and too many young professionals tend to work for the government, instead of creating their own start-up companies.”

Given the view that a reduction in the influence of state agencies, and government generally, in the economy would stimulate growth, some interviewees held the opinion that the government has been making moves in the right direction. Thierry Fautré pointed to the gradual recovery in manufacturing (forecast by the national statistics office, INSEE, at +1.2% in 2014 versus -0.6% in 2013) and the prospect of better, if still modest, GDP growth than in the previous two years as “positive signs underpinning the French government’s strategy to promote an industry-led recovery.” There had been, he said, “a large number of actions introduced by the government in recent years to help restore the country’s industrial competitiveness and increase industrial output.” The situation was summed up by Bruno Leray, general manager of De Lage Landen France, who said: “Fundamental reforms are required to enable growth again. The basis of the French economy is sound, but we cannot live with public spending that

accounts for 57% of GDP. We need to allow companies to grow and invest.” He continued, saying that the reforms need to tackle the complexity of the French system and put some flexibility into the labour market, concluding: “Our new government will hopefully be courageous enough to make those reforms that will have an impact in the long run.” Ralf Behrning


Performance of the leasing market

Views were sought next on reasons for the continuing poor

performance of the asset finance and leasing industry in France. Apart from understanding what has caused it to shrink over the last two years, the subsequent question is when is a return to growth likely, and will it take more than a return to growth in the overall economy for it to pull out of decline?

There were no doubts about the link between an underperforming economy and an equally lacklustre asset finance market. Lack of confidence created by the former leads to lack of investment in the latter, summed up by Jean-Luc Martin, director general of MAN Financial Services in France, who said: “Because of the current economic situation and the uncertainty about the future (political and economic), a lot of players have deferred their investments.”

As Robert Paine, program manager of software solutions and consulting services provider White Clarke Group noted: “Leasing has inevitably been adversely affected by the overall gloomy French economic environment. There has been slow growth, higher taxes and a reduction in company margins, which has led to investment being put on hold.”

Speaking from a fleet auto perspective, but commenting on a situation that applies across the board, Marc Meriemkouli, international account manager at Fleet Logistics, stressed the effect that such uncertainty has had by encouraging cost efficiencies which have included contract length. He observed: “In this uncertain environment, companies move to extend the contract period for maximum financial benefit and try to restructure their internal organization. Both combined have an impact on leasing by reducing volumes ordered.”

Additional factors that have affected asset finance take-up include very low interest rates on traditional loans, higher risk perception and reduction of bank exposure. This latter has been important as banks have been forced to increase capital adequacy ratios, as required under Basel III regulation, leading not only to restricted lending conditions for the main domestic banks but to tighter liquidity for banks’ leasing operations – a situation remarked upon by Jean-François Gervais: “Weak demand and Basel III were the main reasons for the market shrinking. The update of the business segmentation made to be in line with Basel III regulation requirements reduced our contribution to the overall economy.”

Thierry Fautré expanded on these comments, saying: “The tardy economic recovery in France has failed to provide businesses with sufficient confidence to commit to new investments. Compounded by the growing difficulty for companies to access affordable credit due to increasingly tightened lending criteria by banks, many businesses have chosen to hold on to capital to sustain their current businesses until a more positive economic outlook emerges on the horizon.”

Bruno Leray concurred, noting that the fall in investment levels had been exacerbated by the partial or total withdrawal of some foreign players. He added: “French banks have been defensive as they had to deal with other fundamental issues. They are now backed by plenty of


liquidity, and yet we are still roughly 15% below our historical heights. Investment incentives will be key to getting back to normal levels.” The second part of the question posed above is the difficult one: when and how might leasing pull out of decline. Fautré continued: “While it is hard to forecast the exact timing as to when the leasing industry will see growth again, the predicted economic growth for this year, albeit still small, should translate into higher business confidence and possibly new investments which can be enabled by leasing.”

The link between investment trends and leasing was also made by Bertrand Girerd, but he added: “You should also note that in France non-leasing financing is predominant (loan, own equity funding, etc) and we should have a look at the aggregated volumes (i.e. leasing, loans and own equity) to see the real trend of the investment financing

market.” And, looking at the current position and near-term outlook, he said: “At present, you can benefit from very attractive interest rates when you contract a loan and the total cost of financing is more attractive than leasing – outside of other features. Nevertheless, in the near future leasing market figures are expected to follow the pace of investment volume growth,” implying that 2014 is likely to be flat but there should be signs of improvement in 2015.

What is going to drive the markets

The next topic for consideration was the likely sectors and conditions that will be the main drivers of growth in the equipment and auto leasing markets in the near and medium terms. There was general agreement that the main determinant of leasing growth will be economic growth in France, which in turn will be influenced by an upturn in, and therefore greater demand from, the eurozone. The more the prospect is of a steady climb away from recession, the greater will be market confidence, and the need to replace and renew equipment will become too pressing to ignore.

There was considerable agreement also on the emphasis being on captive lessors rather than independent leasing firms. Jean-François Gervais stressed the importance of support from the manufacturer, particularly in a depressed market, stating: “Solutions have to respond to a low growth and rate environment. Sales Aid remains a key

advantage for captive lessors. The vendor approach continues to give a real competitive advantage to leasing companies, thanks to partnership agreements that are fully integrated into the sales process.”

According to Michael Vander, the trend towards captives goes back to the 2009 credit crisis, which led to manufacturers and dealers organizing their leasing solutions in order to reduce risk. He said: “This trend is still a reality and we can expect captive or ‘lease-desks’ (i.e. leasing services developed by a manufacturer or dealer) to have an impact on the market,” adding that, in the current climate, “independent leasing companies (not

bank-owned) tend be less numerous, due to funding challenges.” Bertrand Girerd


Jean-Luc Martin concurred on the importance of captives, commenting: “Key customers are mainly oriented towards captive lessors, and keep bank their credit line for other investments.” However, he added: “Small customers prefer banks, due to them having lower interest rates than captives.”

Looking at the auto sector, Bruno Leray believes “There is a likelihood that we will see more car leasing offers to individuals through banks,” although he does not expect this to presage any fundamental change in the balance of the market between the general dominance of local French banks and the presence of captives, adding that “for the car leasing industry, on one side there are the big two (Arval and ALD) and on the other side the big captives (Renault and PSA).”

From the viewpoint of a market specialist, Ralf Behrning said: “The main drivers for the IT leasing market are cloud computing, new technologies (tablets and smartphones) and new software releases.” He then pinpointed which lessors would benefit from which driver, stating: “Cloud computing will be important for bank-owned lessors and captive lessors, as well as independent lessors for projects with mixed vendors, because of the high volume of transactions and the long term of the investment into the data centre of the outsourcers. Here we see lease contracts with long duration and very low residual values. The second-hand market for this equipment is limited as the vendors control it via their maintenance policies.”

He continued: “Tablets and smartphones will be best for independent leasing companies, as they can take high residual values on this kind of equipment for a short term of lease. Quite often we find different type of vendors in one project (e.g. Apple and Samsung) − that’s why you have to have an independent lessor, not a captive.”

Thierry Fautré emphasized the fact that the need to replace outdated equipment and technology will help drive demand for leasing in the short term. Looking further ahead, he observed: “In the medium term, where there is a more broad-based recovery, there will be intensifying pressure for companies to become more efficient and productive, further propelling the need for equipment upgrades and investment in new technology to maximize business performance, and accordingly driving the use of leasing.”

He concluded: “As business requirements and needs are becoming more complex in the post-crisis economic landscape, access to customized financing solutions with competitive financing rates has become crucial in enabling businesses to realize their investment ambitions. In this context, captive and specialist lessors can take advantage of their sector knowledge and market expertise to provide tailor-made financing arrangements that are most optimal for client businesses.”


What will be the challenges

Asset Finance International asked the panel to consider next what would be the main challenges facing the auto and equipment leasing markets in the near and medium terms.

Unsurprisingly, what should be a main driver is also viewed as presenting a significant challenge – if the economy continues to stall, then the leasing markets will suffer. As White Clarke Group’s Robert Paine put it, “It’s all about confidence. Business needs to have confidence in an economic revival; businesses need to see confidence growing around them, domestically and in the eurozone, so that they can put into action the investment in equipment and processes that they’re uncertain about committing to while the economy meanders.” In the auto leasing and rental sector, as the data in the earlier section of this report shows, there has been a downward trend in recent years. The ailing manufacturing industry has been propped up by government loans and, earlier this year, leading carmaker PSA Peugeot Citroën was rescued again, in part by a major investment from China’s Dongfeng auto company. Jean-Luc Martin of MAN Financial Services stated bluntly that the challenge for the sector is that “the transportation market recovers profitability.”

More specifically, in the fleet segment, Marc Meriemkouli of Fleet Logistics foresees increasing competition, noting that “the main

challenges will be to adapt product and services to clients showing a growing maturity, in a more and more competitive market,” adding that, as clients become more mature in their fleet leasing requirements, lessors must be proactive in introducing cost-efficient solutions: “We have to adapt our service offer in order to accommodate clients in their target of reducing TCO [total cost of ownership].”

Product innovation in a tight market was also brought up by BNP Paribas Leasing Solutions’ Jean-François Gervais, who said: “We need to be focused on innovation in the solutions and services we provide to our clients in order to differentiate ourselves.”

Gervais also mentioned the perennial challenge of keeping up with changes in regulation, commenting: “As they are widely regulated, the markets will have to integrate all kinds of regulatory and compliance issues.”

For Thierry Fautré of Siemens Financial Services, investment is the prime challenge, and the ramifications of a low-investment environment can affect lessee selection and lessor profitability. He explained: “Business investment and leasing market growth are inextricably linked. Therefore, if the momentum of economic growth cannot be sustained in the long run, the equipment leasing market might once again be susceptible to a decline due to falling business investment volumes, without a commensurate increase in leasing penetration.” He continued: “At the same time, some lessors may become more selective with their customer portfolio in a post-crisis economic landscape, choosing to focus their efforts on lower-risk markets and customers.” He then identified the potential downside: “Accordingly,


in order to attract top-tier customers in a relatively low or no-growth leasing market, lessors might be tempted to adopt a low pricing strategy, leading to a potential fall in profitability for the sector.”  Independent financial services consultant Bertrand Girerd was also concerned about risk reduction, stating: “One current challenge is dealing with risk appetite; due to the economic crisis, we experienced until a very recently a rise in company bankruptcies. Accordingly, credit or leasing distribution has been impacted.”

To this, Girerd’s cross-border project partner, Michael Vander, added further areas to watch: “The current rates structure is also a challenge for leasing products’ competitiveness. Leasing regulation may also be a question mark for professionals.” However, there was at least one positive note on regulation, where “we can expect that public sector regulation will change and make it more open to leasing, as financial constraints are put on public spending and funding.”

Another key challenge, according to Vander, “will be to focus on assets and asset segmentation, i.e. the evaluation of new and used assets to be leased, anticipating future value developments, and knowing the second-hand market at a more detailed level.” He concluded: “Understanding and being involved in the industry to be targeted is key.” Girerd then introduced what they described as a behavioural issue, saying: “In the long term, and on a cultural point of view, we can expect that people will leave the asset ownership mentality – Latin behaviour – for usage-based and leasing patterns, as has already happened in the IT and telecom market.”

Girerd elaborated, explaining that he had experienced in different companies that Latin, and especially French, people are driven more by legal ownership of the assets than usage of the assets. He continued: “It is particularly true for hard assets like machine tools or construction equipment. I do not think it comes from any distrust towards financial institutions; it originates more from an ‘independency’ and ‘security’ mentality, by which I mean that, with hard assets,

people think they have a cash reserve if they need to remarket their equipment. Also, ownership allows depreciation of the assets in customer’s books.”

This point was recognized by Ralf Behrning of CHG-MERIDIAN, who saw a main challenge being “To convert a large number of buying customers into leasing customers; to change the mentality of the French manager from ‘owning’ the equipment.”

And Behrning added a final challenge in France from the viewpoint of a German-owned lessor: “To speed up the decision-making processes to shorten the sales cycle. Compared to Germany, it takes more time.”


Market prospects

Having identified the main drivers and challenges, which asset finance sectors provide the best near- and medium-term prospects?

With the outlook for growth generally being so modest, no sector was singled out for anything other than ‘recovery’ in the short term, although there was agreement that the sectors with the best prospects are IT and vehicles, especially trucks. On the latter, specialist Jean-Luc Martin commented on the cost-effectiveness of leasing: “In the truck sector, 50% is financed with leasing offers and 50% with loans or cash. Customers could increase their investment in leasing product, in order to keep their bank facilities for other projects.”

As a bank-owned lessor providing solutions across the board, Jean-François Gervais said: “In the short term, construction equipment could recover, as could commercial trucks and, on a longer-term basis, software.”

Consultant Bertrand Girerd agreed, commenting: “There is still a high potential for growth in IT equipment and especially mobile devices, as usage of ‘nomad’ assets (mobile technologies such as tablets) is rising sharply in the enterprise space.” Taking a broader look at processes, he added: “We can also expect ‘all-in-one’ solutions to grow (i.e. financing, maintenance & services, insurance), not only in the vehicle industry, but also in other sectors.”

A considered assessment of the asset finance market was given by Thierry Fautré, who focused first on the need to replace equipment, particularly heavy plant and machinery. He pointed out that, according to the Federation of Mechanical Engineering Industries (FIM), the average age of machinery used by French companies is now 19 years, compared to nine years in Germany, in stark contrast to the situation 15 years ago, when the average age of machinery was similar in both countries. However, since then German firms have made substantial investment in the acquisition of some 200,000 new machines, compared with just 20,000 acquired in France.

Fautré noted: “As the French government now aims to revive France’s position amongst other leading industrial nations, French industrial companies must regain their competitive edge through equipment upgrades and technology investment. Asset finance will have an important role to play in helping fulfil this recovery.”


He then highlighted healthcare as a sector with potential for asset finance, stating: “The demand for quality healthcare services continues to rise, reflecting an ageing population, as well as emerging conditions related to changes in diet and lifestyle. France is, however, less than well-equipped to meet this increased demand. Asset finance, with its affordability and flexibility, will prove to be an efficient financing tool in helping healthcare organizations acquire much-needed medical equipment without straining their already stretched financial budgets.”

The ‘green’ market

The renewable resources sector was also considered to have potential, as it is an area that cannot be ignored for long and is likely to grow as equipment replacement picks up, with more companies looking to renew with a ‘green’ approach.

Bertrand Girerd observed: “Over the last two years, energy efficiency / saving solutions have been a very active market and firms operating in this industry have worked around financing packages. This market will continue to grow and leasing figures will increase accordingly.”

The role of asset finance in the development of the green market was also stressed by Thierry Fautré, who noted that this is a field that is actively promoted by the French government, with electricity prices for industrial users having risen by 37% over the past decade.

Energy efficiency is a business imperative, as shown by the relentless rise in energy prices, with projections of energy bills increasing by between 16% and 24% for French companies by 2017. However, as Fautré pointed out, there is much to be done: “The green business sector is still in its early stages of development. Many financial institutions are relatively late entrants into the sector and their positioning, therefore, might still require clarity.” But, he concluded, “For specialised lessors, which have already developed expertise in financing energy-efficient and renewable energy equipment, the green market certainly represents an opportunity.”

A different view of the influence of government was provided by De Lage Landen’s Bruno Leray, who said: “We are not convinced that the ‘green’ leasing market will grow significantly in France as it is too much linked to government policies and the margins are historically thin.” There was a similar note of caution from Jean-François Gervais, who advised: “As leasing is broadly a self-funded finance formula, only a few green projects fit the criteria.”

The fact that this is still an under-developed sector was raised by Ralf Behrning, who said that, from a specialist IT angle, “although ‘green labelling’ is starting to be a part of the tenders we have seen in the last 12 months, it is far from being a decision driver. Compared to Germany we are far behind and I cannot see an important impact on the market the next five years.” He added that he expects to see “a long and negative discussion starting about energy prices in France and the idea of getting rid of some nuclear power plants and replacing them with green technology.”

Behrning’s final point contrasted with Fautré’s view of energy costs, and was more in line with Gervais on the immediate prospects. He said: “At the moment, energy prices are very low, and energy-saving projects (e.g. light contracting) do not yet have a positive return on investment.”


SMEs – the challenge of raising capital

The panel turned its attention to small and medium-sized enterprises (SMEs), the methods used to raise capital and fund equipment expenditure, and whether asset finance is expected to take a greater or lesser role in the future.

On the whole, the view was that, in the words of Jean-François Gervais, “Cash generation will remain the most common way to raise capital for SMEs.” The most obvious means for this will be via the traditional route of bank loans, made more likely to be the first method tried owing to the current low rate of interest. Other sources of capital mentioned were private shareholders and venture capitalists, whilst captive finance was viewed as a strong option for equipment expenditure.

However, asset finance is expected to take a greater role. Michael Vander stressed that “capital raising is a long process and brings complexity, compared with loans or leasing that are fast and easy-to-use financing tools; therefore, asset finance should continue to be successful in the future.”

According to a survey conducted by the French SME employers’ confederation (Confédération Générale des Petites et Moyennes Entreprises (CGPME), Baromètre sur le financement et l’accès au crédit des PME, February 2014), two out of three businesses reported financing as their top business challenge, especially equipment financing (42%), followed by cash flow issues (36%).

Moreover, despite low interest rates on offer from banks, 77% of small business owners reported having increased difficulty in accessing credit and traditional bank loans to fund equipment acquisition. Commenting on this, Thierry Fautré said: “The failure to access credit has prompted French SMEs to look for alternative financing solutions, such as leasing. Within this context, non-bank finance is expected to become increasingly relevant in facilitating equipment investment and upgrades, with the funding gap driving further demand for asset financing techniques.”


Opportunities for foreign investors

There are two sides to this topic: first, there is the question of the importance of foreign investment for French businesses, and whether it is seen in France as an opportunity or a threat. Second, specifically related to asset finance, is the feasibility of foreign leasing companies to expand into France, and whether the legislative framework

encourages or hinders such moves.

First, regarding the need for foreign investment, there was agreement that such investment is indeed important, although opinion differed on how welcome it is seen to be. Bertrand Girerd began by saying: “Foreign investment is key for France, and authorities at local or national level do their best to attract foreign investors,” adding that “Foreign investment is linked with the fight against unemployment and any opportunity to create new jobs is welcome.” However, he also observed: “We know that over the last three years, foreign investment in France has decreased,”

citing costs and regulation as likely causes, along with a change in government policy following the last Presidential election.

This point was taken up by Robert Paine, who commented: “Messages sent by the French government have been contradictory and are likely to have impacted the confidence of foreign investors.” He then stated: “However, for the majority of French businesses, such investment is considered to be an opportunity.”

Bruno Leray stressed the need to attract new investment to replace what has been lost due to foreign companies withdrawing from France. He stated: “Foreign investment will come back as long as we have clarity on long-term economic strategy,” adding that “It will be more an opportunity than a threat.”

Ralf Behrning agreed on the need for such investment, noting the effect of the strong branding that French products have internationally, which has recently created significant interest from China. He said: “As French products are well known in China, there are more and more Chinese investors in France prepared to buy all kinds of companies. For instance, there has been a lot of agriculture investment into the wine and milk industry by Chinese investors.”

However, his opinion on the attitude to foreign investment contrasted with the views above. He pointed to continuing government

intervention to protect enterprises perceived as nationally important as an example, saying: “In general, foreign investment is seen as a threat.


That´s why the Ministries are involved in large transactions (such as ALSTOM) and French society supports this.”

Opportunities to expand into France

Regarding opportunities for foreign asset finance companies to expand into France, the consensus was that it is already at saturation level, at least for mainstream financial institutions. Jean-François Gervais of BNP Paribas Leasing Solutions summed up, stating: “Today, the main limit for foreign companies wanting to enter the leasing market is the current number of players compared with the size of the French market.”

Others agreed that the market is highly competitive and dominated by well-established financial institutions with global reach, providing a diverse range of products and making it harder for new players to compete, particularly on pricing.

As to whether a potential market entrant would find the legislative framework a help or a hindrance, it was pointed out by several interviewees that the French banking and finance sector is one of the most highly regulated, but that this should not be viewed as discouraging, at least for EU-based companies as there is a common area of EU regulation.

Thierry Fautré of Siemens Financial Services commented: “French businesses often finance their equipment investments via their house banks. While the legislative framework does not prevent foreign leasing companies from expanding into France, the already established key market players in the asset finance industry might make it difficult for new entrants to gain a foothold in the market.” However, there are always opportunities, given due research and preparation. Consultant Bertrand Girerd advised: “A foreign company aiming at establishing in France should invest significantly, with a strong back-office in order to comply with all regulation duties. Nevertheless, if a foreign company wants to establish in a niche market, there is still the possibility of creating or acquiring a structure dealing with non-regulated lease products, which are usage based and not ownership driven. This type of structure is easy to establish and it can be a door-opener into the French market.”

A good example of a successful source of foreign direct investment (FDI) in France is Germany, with a total stock of FDI of €52.9bn (US$69.2bn) at end-2012 according to the Banque de France, making it the leading European nation investing in France. New investments in France by German companies in 2013 were made primarily in production / manufacturing activities. In fact, in terms of the number of new projects invested in, Germany was responsible for one-fifth of production / manufacturing investment in France over the year, whilst nearly one-third of FDI in the healthcare and automotive sectors, and more than a quarter of FDI in the energy sector were made by German firms. (Source: Invest in France, ‘Job-creating foreign investment in France 2013’.)

And where the investment opportunities lie is where the leasing companies will have a close interest. Girerd’s cross-border project partner, Michael Vander explained: “German lessors tend to follow German manufacturers, and the more intensive the partnership (e.g. for mechanical and engineering) the more appetite to run such business in France – even when there are legal hurdles.”


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