France - HSBC

Navigator 2020France

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Navigator 2020 France | 2

1. OverviewContents

1. Overview

2. Business outlook

3. Future strategy

4. International trade

5. Reshaping supply chains

6. Sustainability

Survey methodology

The results of our 2020 Navigator survey suggest French businesses remain cautiously optimistic

The past year has taken its toll on French companies. Around a third have become more pessimistic, higher than globally and in Europe. Expectations of future growth have also fallen.

Yet despite this, and in line with global findings, the bulk of businesses are adapting to the changing environment. And seven in ten say they will have recovered to pre-COVID levels of profitability by the end of 2022.

Trade with Europe and North America is on the up, though there are fears over what further waves of the virus would mean for domestic and international trade.

French companies, like globally, have concerns about their supply chains, with the majority now prioritising finding suppliers closer to their customers.

Close to three-quarters of businesses have set sustainability targets, up on 2019.

Introduction

A long national lockdown hit France hard, but after it ended in May the economy rebounded more than expected. Consumer spending on goods, along with industrial production and construction, recovered significantly, though growth has since slowed as COVID-19 has regained hold. A week before our 2020 Navigator survey launched, the government unveiled a fourth fiscal package (€100bn) focused on boosting growth supply-side in 2021 and 2022. But unless businesses shed their caution about investing or creating jobs, recovery will be gradual.

Current status of business France Global

Surviving day-to-day

Adapting to a changing environment

Thriving in the new normal

19%

58%

24%

18%

61%

21%


2. Business outlook

French companies are more conservative in their growth projections than their European peers

French businesses have become more pessimistic in their outlook over the past year, compared with globally and Europe overall.

Those reporting being more optimistic has slumped to 27% from 50% in 2019. Meanwhile, the proportion of sceptics has increased more steeply than globally and in Europe.

Expectations of future revenue growth have also fallen. Fewer than three-fifths (59%) of companies in France are expecting growth, a drop of 25% compared with 17% across Europe and 15% globally.

Despite this, the majority say they will recover by the end of 2022, in line with global findings. And a third see the impact of COVID-19 as the single biggest growth driver.

That said, businesses fear further waves of the virus would threaten growth and recovery.

of businesses expect to return to pre-COVID profitability levels by the end of 2022

When businesses expect to return to pre-COVID levels of profitability

Top 3 drivers of business growth

1Impact of COVID-19

3Introduction

of new products & services

2Company culture /

motivated workforce

72%

%

Germany

Belgium

Switzerland

Netherlands

Russia

France

UK

Sweden

Ireland

Italy

Greece

Poland

Spain

Already ahead of our pre-COVID levels End of 2020 to 2022 2023 to 2025


2. Business outlook (continued)

of French businesses intend to increase investment in their business in the next year, despite the challenging environment

French businesses invest cautiously

Fewer businesses in France than globally intend to invest more to grow in 2021. Only a third, compared with around two- fifths globally, plan to boost investment by 5% to 20%. And fewer than one in ten (6%) say they will invest by 20% or more.

Those that do plan to invest are focusing on activities that stimulate demand, such as the customer experience, marketing, product and service innovation and employee wellbeing.

Close to 90% plan to increase or maintain investment in key technologies that help target new customers and facilitate innovation.

1Cut costs

3Improve the

quality of their products / services

2Invest in the

customer experience

4Improve cashflow

management

5Invest in the workforce / employee wellbeing

How business outlook has changed in the last 12 months*

58%

%

Strategies of French businesses to benefit from growth drivers and address threats

18

26

55

6832

73

7722

6236

80

67

18

32

43

83

8020

88

85

12

15

7920

86

82

13

16

CHANGE IN BUSINESS OUTLOOK VS PAST 12 MONTHS [Q15]France

APAC

North America

MENAT

More pessimistic

Europe

South America

Rest of Africa

2019

2019

2019

2019

2019

2019

2019

2020

2020

2020

2020

2020

2020

2020

France

More optimistic or expect to stay the same

*Excludes businesses answering 'Don't know'


Innovation and open-mindedness are important factors for French businesses going forward

The level of change in French businesses during 2020 is very close to the global picture. The key drivers of change were the need to reduce costs, as well as shifts in societal expectations and ways of working.

About a third of businesses cited innovation, reputation and fulfilling environmental responsibility as key characteristics of a successful business in the future.

When identifying what makes a successful entrepreneurial business, more French businesses than globally believe ‘human’ traits will remain as important as they are now. These traits include open-mindedness and inclusivity (57% compared with 47% globally) and a diversified workforce at all levels (55% compared with 49% globally).

Businesses believe that becoming more entrepreneurial over the next year will make them more customer-centric and competitive.

3. Future strategy

72% of businesses have undergone changes in the last 12 months

Top 5 facets of a successful entrepreneurial business

1Agility /

capacity for change

3Speed to market

2Technical innovation

4Open-

mindedness / inclusivity

5Collaborative (rather than competitive)

Investment priorities enabling businesses to move forward %

Prod

uct i

nnov

atio

n

84

Empl

oyee

wel

lbei

ng

80

Proc

ess

inno

vatio

n

84

New

mar

kets

80

Sust

aina

bilit

y

79

Cus

tom

er

expe

rienc

e

85

Cyb

er s

ecur

ity

78

Cas

hflow

75

Supp

ly c

hain

tr

ansf

orm

atio

n

69

Dig

ital-o

nly

tool

s

80

Ups

killi

ng w

orkf

orce

80

Sale

s ch

anne

ls

79

Mar

ketin

g

78


As international trade slows, France focuses on Europe

Like their global peers, French businesses think international trade has become, and will remain, more difficult.

Trade within Europe leads the way for just under seven in ten French companies (69%), a small increase on 2019. Germany remains the top trading partner for more than a third of companies (36%), as well as the most attractive individual market for expansion. Business with North America is up slightly, but significantly down with APAC. This downward trajectory is expected to continue over the next 3-5 years.

Nearly half of businesses say protectionism is increasing. Ineffective government strategies to tackle COVID-19 are also cited as reasons for reducing or stopping business.

French businesses think a reduction in international trade would lead to less demand, restricted employee movement, fewer partners and increased costs.

4. International trade

Protectionism

Percentage of businesses that think that countries/territories/governments are becoming more protective of their domestic businesses

of companies expect their international trade prospects over the next 1-2 years to be positive

63%

Priorities for expansion in the next 3-5 years

Markets, territories and regions in which French businesses are looking to expand

Markets & territories Regions

65

55

45

201920182017 2020

14%

APAC(17% in 2019)

11%

Belgium(12% in 2019)

10%

Italy(8% in 2019)

18%

Germany(15% in 2019)

44%

Europe(48% in 2019)

11%

North America

(18% in 2019)


5. Reshaping supply chains

Adjusting to COVID-19, French businesses are modifying their supply- chain selection criteria

French businesses are as concerned about their supply chain as their global peers.

Their main worries are growing costs, supply chain instability, and suppliers being distant from either target customers or their businesses.

In response, they are selecting suppliers based on their government’s control of COVID-19, along with their resilience and speed of delivery. They are also favouring suppliers in their home region.

These changes are reflected in investments for 2021. More than half of French businesses (53%, compared with 43% globally) will make it their immediate priority to focus on suppliers closer to their customers. In doing so, over two-fifths hope to reduce costs while around a quarter expect to increase their speed to market, become more sustainable and reduce both complexity and unforeseen risks.

1Cost

reduction

3 Improved

environmental and ethical

sustainability

2Faster

to market by moving closer to end buyer

of businesses expect that reshaping their supply chain will reduce costs

Priorities for the supply chain

(Priorities immediately in 2021 and beyond) %

Supp

liers

clo

ser t

o cu

stom

ers

78

Use

of d

igita

l/tec

hnol

ogy

78

Wor

k w

ith m

ore

supp

liers

68

Gre

ater

tran

spar

ency

74

Tigh

ter s

peci

ficat

ions

/con

trac

ts

64

Focu

s on

hom

e re

gion

71

Res

ilien

t/abl

e to

del

iver

qui

ckly

74

Futu

re p

ande

mic

con

trol

67

Wor

k w

ith fe

wer

sup

plie

rs

59

Supp

liers

’ sus

tain

abili

ty p

ract

ices

69

Tran

spor

t/sto

rage

man

agem

ent

6643%

Top 3 benefits of reshaping the supply chain


French businesses are very aware of the business benefits of sustainability

Businesses in France, like the rest of the world, recognise they have much to gain from becoming more sustainable. In particular, they recognise the opportunity to explore new ways of working and improve both employee wellbeing and their business reputation.

Just over three-quarters (78%) also believe a greater focus on sustainability will lead to a boost in sales, slightly lower than the global average (86%). French businesses are increasingly taking action to realise these benefits. More are measuring environmental and social aspects of sustainability than in 2019, and around three-quarters have set targets.

French companies focus on some areas more than their global peers, including energy usage, the carbon footprint of products and services and the gender pay gap.

6. Sustainability

8% expect growth of 10% or more

Companies believe a greater focus on sustainability will drive growth

Measuring sustainability

More companies have been measuring environmental and social aspects compared with 2019

Environmental Social Governance

90%of French companies think there are multiple opportunities for their business from improving their environmental and ethical sustainability

51% expect modest growth of up to 5%

19% expect growth of between 6% and 9%

61% 59%40%

36%

68%72%

2019

2020


For further information about the research please contact:

Kate WoodyattHSBC Global [email protected]

Or click on www.business.hsbc.com/navigator Note There may be a slight discrepancy between the sum of individual items and the total as shown in the tables due to rounding.

Whilst every effort has been made in the preparation of this report to ensure accuracy of the statistical and other content, the publishers and data suppliers cannot accept liability in respect of errors or omissions or for any losses or consequential losses arising from such errors or omissions. The information provided in this report is not intended as investment advice and investors should seek professional advice before making any investment decisions.

About HSBC Navigator France The HSBC Navigator survey, which is the largest of its kind, is conducted on behalf of HSBC by Kantar. The study gauges sentiment and expectations of businesses in the near to mid-term future on topics including: business outlook, future strategy, international trade, supply chains and sustainability. It is compiled from responses by decision-makers at 10,368 businesses – from small and mid-market to large corporations – across a broad range of industry sectors in 39 markets.

Sample sizes for each market were chosen to ensure the statistical accuracy of results, with 350 businesses surveyed in France. Global results are based on an average of the 39 markets (using weights based on each market’s share of world trade). The survey was conducted between 11th September and 7th October 2020. Interviewees were polled on a range of questions including how COVID-19 has affected their business and potential for growth. The survey represents a timely source of information on the fast-evolving international business environment.

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France - HSBC