Business World

Sunday 17 December 2017

France announces €2.5bn plan to boost business investment

the Airbus A380 aircraft assembly line in the Airbus Group NV factory in Toulouse, France
the Airbus A380 aircraft assembly line in the Airbus Group NV factory in Toulouse, France

Firms are to be given bigger tax rebates on investments as part of reforms announced to boost business activity and help the slow revival of France's economy.

Flat business investment remains a drag on the improving outlook for the euro zone's second-largest economy at a time when consumer spending and exports are picking up.

The government will allocate €2.5bn over five years for tax rebates to boost investment, Prime Minister Manuel Valls said.

A key measure will be allowing firms to write down 140 percent of the value of industrial investments they make between now and April 2016.

Local authorities will be reimbursed more quickly on sales tax paid on their public works investments and some tax rebates on housing works will be extended.

The measures were part of an updated multi-year budget plan expected to be unveiled later on Wednesday, in which France will target a smaller reduction in its structural deficit in 2016 and 2017 than called for by the European Commission.

After the ruling Socialists suffered severe defeats in local elections last month, the government announced it would quickly take steps to boost investment and jobs, but the measures announced on Wednesday included no major steps on jobs.

Ministers have mentioned the possibility of making it easier to hire and fire staff, but the prospect of a swift overhaul of work contracts is fading, said labour unions and employers' groups who took part in talks on the issue last week.

Cutting red tape in the labour market is at the heart of reforms sought by the European Commission.

A draft law seen by Reuters shows the government does plan to eliminate some red tape. But the bill set to be unveiled on April 22 will not cut the number of bureaucratic hurdles that employers say hamper growth once they hire 50 or more workers.

France's official statistics office INSEE estimated last week that corporate investment would be completely flat in the first quarter and up just 0.1 percent in the three months to June. Investment in real estate, whether by households or businesses, will remain firmly in the red.

Valls said a deal had been struck with motorway operators that will unlock a 3.2 billion-euro road investment plan. Talks on the plan will be wrapped up soon and include no toll hike for this year, he said.


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