FRANCE Trends and Developments Contributed by: Hugo Sanchez de la Espada, Robin Gaulier, Magalie Dansac Le Clerc and Aurore Cormary, Baker McKenzie Paris
France as a Business Destination In 2026, France remains the leading European des - tination for foreign investments and, even in a more selective international environment, the country con - tinues to draw substantial international capital. For the seventh consecutive year, France ranked first in Europe in 2025 by number of foreign investment pro - jects, with 852 projects, ahead of the United Kingdom and Germany. These figures reflect a set of deep- rooted structural advantages: world-class infrastruc - ture, a highly skilled workforce, a dynamic innovation ecosystem fuelled by initiatives such as French Tech, Choose France and the France 2030 investment plan, and a central geographic location within Europe. At the same time, however, the French business envi - ronment is operating under greater pressure than in previous years, with political tensions, fiscal and high public debt constraints, and a more volatile interna - tional context impacting investment decisions directly. Political and Economic Context France has experienced a period of significant politi - cal instability since the 2024 snap elections, with a succession of short-lived governments and difficult parliamentary arithmetic that long delayed budget - ary decisions. A measure of stability has, however, returned with the appointment of Sébastien Lecornu as Prime Minister, allowing the government to push through some reforms and to maintain a credible tra - jectory to keep the public deficit under control. France nonetheless remains under pressure to reduce its public deficit, which stood at 5.1% of GDP in 2025, with public debt projected to exceed 118% of GDP by end-2026. The government’s consolidation efforts have, however, been acknowledged at both Europe - an and market levels: the European Commission has kept the excessive deficit procedure opened in 2024 suspended, recognising France’s compliance with its commitments, and Standard & Poor’s maintained France’s “A+” sovereign rating with a stable outlook in May 2026. The political context nonetheless remains tense in the run-up to the 2027 presidential elections, which are likely to weigh on consumer and business confidence and complicate the adoption of structural reforms.
On the macroeconomic front, France is exposed to a deteriorating international environment, marked by new US tariffs and the economic fallout of the war in the Middle East, which has triggered a sharp rise in energy prices across Europe. France has, how - ever, proved more resilient than its main neighbours: inflation stood at 2.8% in May 2026 below Italy and below the projected euro area average, supported by its largely decarbonised, nuclear-based electricity mix, which insulates the country from the doubling of gas prices triggered by the closure of the Strait of Hormuz. Activity has nonetheless slowed, with growth projected at 0.5–0.7% in 2026, unemployment rising to 8.1% in Q1 2026 and corporate insolvencies reach - ing a historic high. Looking ahead, the resolution of the conflict in the Middle East is expected to have a materially positive impact on the French economy, easing energy prices, restoring supply chain stability and improving overall business and consumer confi - dence across the euro area. Despite this challenging environment, certain sec - tors continue to attract major investments and drive growth. French industry has shown remarkable resil - ience, with manufacturing output rebounding strongly in early 2026 (+1.3% in March and +0.4% in April) and helping the economy to avoid a technical recession. This momentum is supported by historically high lev - els of corporate investment, which are now more than 10% above pre-pandemic levels, and by the struc - tural strength of strategic industrial sectors, including aerospace, naval, space and rail equipment, whose output now exceeds 2019 levels by nearly 28%. The defence sector, in particular, is operating at full capac - ity, supported by NATO members’ rearmament com - mitments and heightened geopolitical tensions, with strong order intake at Thales and other prime contrac - tors and a record contribution to French exports. France is also emerging as Europe’s leading hub for artificial intelligence and is set to become one of the continent’s primary territory for AI infrastructure, sup - ported by its abundant, decarbonised, nuclear-based electricity supply. The 2026 Choose France summit confirmed this dynamic, with a record EUR93 billion of announced foreign investments driven largely by AI projects, including Japanese group SoftBank’s land - mark commitment of up to EUR75 billion to develop
379 CHAMBERS.COM
Powered by FlippingBook