The second round of the French presidential election was marked by the lowest turnout since 1969, with around 28% of voters not showing up to the polls. But there were at least two main constituencies that appeared enthused by the re-election of France’s youthful President Emmanuel Macron. The first was business executives – around 77% of whom voted for Macron, according to an Ipsos poll, versus just 33% of blue-collar workers.
The second constituency was an external one: mainstream European leaders. Mario Draghi, Italy’s prime minister, called Macron's win ‘splendid news for all of Europe’, while European Commission President Ursula von der Leyen said she was ‘delighted’ to be able to continue the ‘excellent cooperation’.
‘Even light-touch border checks would have been frustrating for French and European companies'
So why were these two groups such steadfast supporters of President Macron? And what might his second term mean for businesses in both France and the EU?
Positive light
Starting with Europe, Macron’s re-election is likely to be viewed in a positive light by both pro-European leaders and European businesses more broadly. The most obvious reason is the Eurosceptic nature of his opponent, Marine Le Pen.
‘Investors were concerned that a win by Le Pen would provide a broader impetus to Eurosceptics'
While the leader of the National Rally party dropped her earlier calls for ‘Frexit’ – a French exit from the EU – her platform contained policies that would have taken the union in a very different direction. Notably, she called for the reimposition of some border checks on the movement of both goods and people.
‘Even light-touch border checks would have been frustrating for French and European companies that have grown accustomed to frictionless trade and unfettered access to workers from across the region,’ says Jessica Hinds, a European specialist at Capital Economics. ‘It would also have been contrary to the founding ideals of the EU.’
Inside dismantling
A Le Pen win also posed indirect risks to borrowing costs of companies within France and beyond, Hinds argues. ‘There was a sense that Le Pen would have dismantled EU structures from the inside. At the very least she was opposed to further fiscal integration and joint borrowing.
'This could have dented market confidence in the ability of policymakers to avoid an increase in peripheral bond spreads as the European Central Bank raises rates.’
The upshot here could well have been not just a rise in borrowing costs for the French government, but also the governments of Italy and Portugal – rippling through to costlier financing for domestic businesses.
Long-term potential
The contrast with Macron was stark. He has been a key proponent of measures to improve the integrity of the EU, including plans for joint borrowing during the pandemic, which reduced the fiscal pressure on more indebted countries during the Covid-19 crisis, helping to shorten the economic downturn.
‘There was a sense that Le Pen would have dismantled EU structures from the inside'
‘This may have set a precedent that such joint borrowing is possible during crises,’ says Hinds, ‘which is another indirect positive for businesses.’
The election outcome also has a potentially positive signalling effect regarding the EU’s longer-term potential. ‘Investors were concerned that a win by Le Pen would provide a broader impetus to Eurosceptics in the rest of the region, including Italy,’ says Marc Chandler, chief strategist at Bannockburn Global Forex. ‘The overall effect would be to cast doubt on the future of the EU.’
Integration issue
Even though Le Pen did increase her vote tally compared with her presidential run in 2017, Macron’s victory underlined that the goal of greater EU integration remained intact. It was notable that one of his first speeches since his re-election was dedicated to proposing a new European political community that could include Ukraine and the UK.
‘This new European organisation would allow democratic European nations...to find a new space for political cooperation, security, cooperation in energy, transport, investment, infrastructure, the movement of people,’ he said.
Finally, companies involved in green technology throughout Europe and within France are likely to be encouraged by Macron’s pledge for new investment in renewable energy, clean air, and energy efficiency. The €50bn plan over his coming term would include a major boost for solar energy, offshore wind power and onshore wind, along with further investments in the mainstay of France’s energy production – nuclear.
‘There was a concerted effort to cut red tape, along with making it easier to reduce headcounts'
Again, by contrast, Le Pen’s Rassemblement National Party had said that the EU’s zero-carbon objective ‘does not make sense’ , describing it as economically unreasonable, and was opposed to wind power in particular.
More than tax
Then there is the second major question: what could Macron’s win mean for French businesses? ‘There is a reason that he got such a high level of support from executives,’ says Hinds. Much of Macron’s first term was dedicated to improving France’s notoriously sclerotic business conditions. This included reducing corporation tax from 33.3% to 25% and cutting employers’ social contributions.
But it went far further than simply taxation, says Hinds. ‘There was a concerted effort to cut red tape for companies, along with making it easier to reduce headcounts when needed,’ she says. It became faster to register a company and to liquidate an insolvent one, making it easier for business owners to move on to a new venture if one failed.
Continued momentum
Although Macron may need to focus more on consumers in his second term – given the recent surge in inflation – he has promised to continue the pro-business momentum. Notably, he has taken aim at forms of business taxation that are based on turnover rather than profits.
In particular, he proposes abolishing the CVAE, which is determined by a company’s added value and is paid by all firms with a turnover of more than €152,500, regardless of whether they are profitable.
So far, Macron has not addressed the most unpopular tax among businesses, the C3S tax, which represents a tax at each stage of the production process and which the French government’s thinktank, Conseil D’Analyse Economique, described as ‘the most harmful tax on companies’. Based on his record, however, it is possible that this could become a focus later in his term.
Of course, Macron’s freedom for action is likely to be constrained both by the performance of his party – recently renamed Renaissance – in parliamentary elections scheduled for 12 and 19 June, and also the views of other European leaders. Macron may decide to pivot his focus in a second term to address the politically pressing issue of rising living costs for households.
But companies in France and Europe will be hoping to benefit from another five years of pro-business policies.
