Trésor-Info - Publications de la direction générale du Trésor - investment

The Impact of Brexit on the United Kingdom's Economy

2024-04-30T00:00:00+02:00

The United Kingdom’s withdrawal from the European Union (EU), which was voted for by referendum in June 2016, became effective on 31 January 2020. After a transition period, the UK left the single market on 1 January 2021. Brexit has had an impact on the United Kingdom’s economy and has dampened its growth potential through three main channels.

Firstly, owing to the reintroduction of non-tariff barriers, the UK’s trade in goods with the EU fell in 2021 to a greater extent than trade with non-EU countries, although the impact only seems to have been temporary. On the other hand, trade in services with the EU has been more lastingly affected, especially for financial and transportation services.

Secondly, business investment in most sectors has stalled since the 2016 referendum following a period of strong growth. Due to the effects of both Brexit and the COVID-19 pandemic, in Q2 2023, it was more than 20% below the level that it would have reached had it maintained the momentum seen between Q1 2010 and Q2 2016 (see Chart).

Lastly, restrictions on the employment of EU nationals have reduced the labour supply at a time when the UK’s labour market is under great strain. Employment of EU workers has levelled off since 2016 whereas it had rocketed during the years prior to the referendum. This has forced British employers to have greater recourse to non-European labour.

How Dependent Are Emerging Market Economies on China's Growth?

2024-01-30T00:00:00+01:00

China is now the top export market for many emerging countries, as its average share of exports from these economies rose from 4% in 2002 to 12% in 2022. Additionally, the growth of outbound Chinese tourism has created new forms of dependence, especially for certain Asian countries.

Emerging economies are also financially dependent on China through commercial and sovereign loans. The main recipient sectors (energy, mining and transport) and regions (Asia and Africa for almost 60% of the loans) are in line with China’s strategic priorities, particularly in terms of its supply needs. China’s total outward foreign direct investment (FDI) flows remain low in relation to loans, but Chinese FDI accounts for a significant share of the FDI stock of several countries (Pakistan, Angola, South Africa and Thailand).

China’s slower medium-term growth – which the IMF has projected will fall to 4% over the next few years, down from 8% in the 2010s – will affect emerging economies through two primary channels. On the trade side, slower Chinese growth will result in (i) a decline in domestic demand and imports, and (ii) price and volume effects on commodities. On the finance side, China’s slowdown will play a role in the continued push, which began in 2015, to reduce the flow of its financing (loans and FDI) to emerging economies (see Chart), and in the country’s geographic and sectoral refocusing, as already reflected in the shift in the official stance regarding the Belt and Road Initiative (BRI). Asian countries and commodity-exporting countries are expected to be the most vulnerable to China’s structural slowdown due to their close trade ties with Beijing.

The Dual Income Tax System in Sweden

2023-09-21T00:00:00+02:00

For quite some time Sweden has stood out for its high level of aggregate tax and social security contributions, but over the past twenty years the tax burden has significantly lightened. Households are the hardest hit by the Swedish taxation system. Most general government revenue is generated by indirect taxation and personal income tax, with the latter financing local authorities to a large degree and its marginal rate exceeding 50% in the higher brackets. Tax on personal assets is low.

Most notably, Sweden was the first country to introduce a dual income tax system, with the progressive taxation of labour income and the flat-rate tax for capital income, as part of a major reform in 1991. With a view to bolstering competitiveness, there has also been a constant effort to cut rates and broaden the tax base. The corporation tax rate has been gradually lowered to 20.6%, matching the EU average.

The moderate level of social security contributions is partly attributable to the pension system’s strong reliance on capitalisation. Generally speaking, taxation of the labour factor nevertheless remains relatively high as a result of the general payroll tax.

The 1991 reform resulted in a foreign direct investment boom and a pick-up in the pace of total factor productivity growth. Over the long term, Sweden has one of the highest business investment rates in the EU, but taxation of the labour factor is accompanied by structurally high unemployment.

Westminster & City News du 1er au 7 octobre 2021

2021-10-08T00:00:00+02:00

Fait marquant

Plus de 200 investisseurs sont attendus au Global Investment Summit

Actualité macro-économique

R. Sunak met l’accent sur la responsabilité budgétaire lors de son allocution au Congrès du parti conservateur
Le Chancelier a dévoilé de nouveaux financements à hauteur de 500 M£ pour son initiative Plan for Jobs
L’augmentation des salaires ne serait qu’un effet conjoncturel

Actualité commerciale

Le ministre du Brexit David Frost fait planer la menace de l’article 16
La ministre au commerce international Anne-Marie Trevelyan promeut les opportunités du libre-échangisme pour les exportations britanniques
Le commerce a contribué à hauteur de 1 point de pourcentage à la croissance globale du PIB au deuxième trimestre

Actualité financière

Selon CityAM, les investissements en capital risque ont atteint 4,9 Md de dollars dans les fintechs britanniques au troisième trimestre
Les firmes de private equity paient des primes records pour le rachat d’entreprises publiques
Deux enquêtes révèlent les inégalités salariales entre hommes et femmes ainsi que les discriminations raciales dans le secteur de la finance
La Banque d’Angleterre encourage le secteur financier britannique à participer à l’initiative d’exercice de prévention visant à tester ses mécanismes de cyberdéfense
Le Financial Reporting Council (FRC) a reçu des appels à publier son rapport sur la qualité des audits

France remains the most attractive country in Europe for foreign investors

2021-06-10T00:00:00+02:00

France held its no. 1 position in 2020, receiving 985 investment projects across the country. For the second year running, it was ahead of the United Kingdom (975) and Germany (930).

This achievement demonstrates the robust fundamentals of the French economy, strengthened by the proactive reforms the Government has implemented over the last four years.

A vast programme of long-term reforms has been implemented since 2017 to enhance France’s attractiveness for businesses. The Government has taken strong steps to boost competitiveness: cutting corporate taxation, reforming the labour market, making the research tax credit permanent, and reforming the taxation of persons through the creation of the flat tax on income and the real estate wealth tax.
In addition, the Government has worked to simplify procedures for companies and investors, particularly through the 2019 business transformation and growth (PACTE) Act. These structural, long-term reforms made France Europe’s most attractive country in 2019.

France’s continued leadership this year demonstrates the effectiveness of the massive support measures deployed by France to address the economic consequences of the COVID-19 crisis. An exceptional emergency plan was implemented to support companies and preserve the economy’s fundamentals, jobs and, therefore, skills and expertise, with a clear result: foreign investors remain confident in France, as shown by regular reinvestment in their French sites (60% of projects identified are extensions).

The swift implementation of the France Relance recovery plan in summer 2020 and the Government’s continued attractiveness policy have bolstered France’s position in Europe. This survey confirms the excellent perception of the French business environment and the Government’s economic policy among international business leaders: 44% of foreign investors think France Relance is more effective than the recovery plans adopted by other European countries, while 56% of investors questioned planned to bring back activities to France.

The detailed responses show that France stands out in many categories. It ranks first for:

Installation of industrial projects, well ahead of competitors, with 341 manufacturing and industrial projects as against 153 in Turkey and 112 in the United Kingdom.
Installation of R&D centres, with 115 new investments in 2020, ahead of the United Kingdom (114) and Germany (63).
Job creation, with 30,558 new jobs created in 2020, up 21.6% since 2017, including 10,636 jobs created in the industrial sector (35% of the total).

Moreover, 58% of business leaders believe France can become a global leader for ecology in the next five years.

Lastly, thanks to the post-Brexit effect and the attractiveness of the Paris financial centre, projects in the finance sector rose by 23% in 2020. This momentum makes Paris a leading European financial centre.

For more details, EY reports.

Live and (don't) let die: The impact of Covid-19 and public support on French firms

2021-04-20T00:00:00+02:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

The Covid crisis has had a massive impact on the economy, especially on firms. The French Treasury has developed a microsimulation tool which allows to estimate the impact of the crisis, and of public measures taken in response to it, on financial health at the firm level. This tool is based on an accounting model similar to the one used in several publications, however it also integrates observed data at the firm level on the magnitude of the shock on firms and their use of the public support. In particular, it makes use of observed data on the evolution of the turnover, employment and payroll of firms, as well as their use of the short-time work scheme, the solidarity fund for SMEs and payroll taxes deferrals. Such a tool allows to simulate the evolution of illiquidity, insolvency and indebtedness at the firm level, taking into account the heterogeneity among firms. Results show that the financial health of firms has deteriorated in 2020 compared to a year without crisis, but public support – mostly the short-time work scheme and, for small firms, the solidarity fund – has considerably limited the increase in the number of illiquid or insolvent firms. Moreover, the impact of the crisis varies across industries and insolvency affects productive firms more than it does in normal times. Finally, the increase of firms’ debt in 2020 may impair investment during the recovery. Relying on a dynamic model of corporate investment under financial constraint, we estimate that the debt overhang caused by the crisis could reduce corporate investment by almost 2% during the recovery phase. However, a similar model shows that R&D spending could be more resilient to the deterioration of firms’ financial health.

Why invest in France?

2019-02-14T00:00:00+01:00