Finance

France’s north takes political centre stage ahead of 2022 polls

Last month Emmanuel Macron trumpeted a new electric battery factory for the former coal-mining region of northern France. The only problem: local politician and presidential candidate Xavier Bertrand had already made the announcement three days earlier. 

In what amounted to his first re-election campaign speech, Macron later outlined the need for France “to reindustrialise” and said he hoped the electric battery projects in Hauts-de-France heralded “massive investments in the transformation of the auto industry”.

“It’s not speeches that count, the real question is what is actually being done,” commented Bertrand, a centre-right former health minister who has headed the regional council since 2015.

Less than a year before presidential elections, the political tussle in Hauts-de-France reflects how the issue of re-industrialisation has taken centre stage in the campaign, as the region becomes a test case for the rehabilitation of mainstream politics.

Marine Le Pen’s far-right party has found fertile ground in the once left-leaning province, which has the highest unemployment rate in France, at 9.4 per cent. The Rassemblement National leader, who opinion surveys suggest will garner enough votes to make it to the second round of the presidential elections next spring, recorded some of her biggest electoral wins there.

Hauts-de-France is an obvious choice for battery projects. France’s car industry invested there massively from the late 1960s, which partly helped offset the decline in mining and steel. But manufacturing has been increasingly outsourced to cheaper factories in emerging markets and jobs have leaked away. Now as carmakers face EU antitrust scrutiny and emissions regulations, plants are in jeopardy again.

The northern region around Lille has had the second highest number of net factory closures in the past 12 years out of the French regions, according to data compiled by Trendeo, a Paris-based consultancy. Between 2006 and 2016, the industrial sector in the region lost more than a quarter of its workforce, the greatest decline recorded in metropolitan France, said Insee, the French statistics agency.

Bar chart of net of closed and opened factories, 2009-2021 showing Hauts de France has seen the second highest number of factory closures

But there are tentative signs of improvement: factory closures have slowed down in the past three years. Hauts-de-France has also been among the top destinations for foreign direct investment since 2014, and boasts the highest per capita number of jobs created by FDI, according to Business France, a government agency.

Analysts say that while Macron’s presidency and Bertrand’s local efforts have not yet reversed the region’s industrial decline, the rise of the far right in the poorer province and the emergence of the gilets jaunes protests have meant it has been the subject of greater financial and political attention.

At the helm of a highly centralised administration, Macron deserved most of the credit for pumping money into new industries including batteries and hydrogen, cutting red tape and “pleading with the EU” to take industrial autonomy more seriously, said Elie Cohen, a senior economist at the National Centre for Scientific Research.

His push to bring production back to France has gained more traction during the pandemic, as logistical and supply issues cropped up in sectors such as drugs, medical equipment and manufacturing components, including semiconductors.

Column chart of net factory closures and openings in Hauts de France showing The number of new factories has picked up since 2014

These efforts have been complemented by funding and training provided by the regional council chaired by Bertrand. He has “gotten his hands dirty” fighting to attract businesses and to give them autonomy once they arrived, according to Jean-Luis Guerin, an economist and director of Finorpa, a local private equity firm.

In the northern city of Douvrin, an electric battery joint venture by carmaker Stellantis and French energy group Total, called Automotives Cell Company (ACC), is to start producing batteries at the end of 2023, creating 1,400-2,000 jobs by 2030. The state and region have invested €1.2bn and €120m respectively, according to Yann Vincent, chief executive of the joint venture.

EV batteries have become a state priority as Europe “cannot be in the hands of China”, which currently dominates the market, Vincent said.

Whatever gains have been achieved, the turnround is fragile, economists say. They point to a decrease in net foreign direct investment in France during the pandemic last year. Some argue that this should prompt a rethink of France’s centralised policymaking.

Column chart in € (bn) showing foreign direct investment in France falls to lowest level since 2014

The country’s “top down” strategy of pumping money into large companies such as Stellantis had not done enough to foster growth for small businesses, said Daniela Ordonez, at Oxford Economics. France was “too paternalistic” in how it chooses industries to back.

“Trade in industrial products gets worse every month, our market share in world exports gets worse every quarter,” Patrick Artus, chief economist at Natixis, said. “If you keep creating only bad jobs, even if you go to lower unemployment, you will have more gilets jaunes.”

Meanwhile for 40-year-old Fabrice Jamart, a member of the CGT union at the Stellantis factory, talk of state policy and new industries eludes more immediate risks of jobs disappearing. Looking out the window of his makeshift office outside the plant, he said: “hope is good, but hope doesn’t put food in my refrigerator”.

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