What the French snap elections mean for businesses

Last updated: 18 June 2024 Views: 350
What the French snap elections mean for businesses

Elections are very much in vogue. French President Emmanuel Macron has called a snap election in France following a heavy defeat in the European elections, where the far-right National Rally won more than double the votes of any other single party. This has prompted some chaos among other parties, who have had to scramble to put candidates in place.

The legislative elections may seem to have come out of nowhere, but they represent a predictable and calculated gamble from President Macron. So why has he called them, what exactly brought us to this point - and what do the French elections mean for businesses in France and beyond?

Election season

As we highlighted in our article on elections in 2024, this was always going to be a decisive year for European politics. What nobody could have predicted was just how decisive, or how many would overlap with each other. The announcement of French legislative elections immediately followed the European elections, and comes as the UK is in the midst of its own surprise general election.

The move to call legislative elections is a response to the European election results in France. In a pattern repeated across much of the continent, the right-wing populist party National Rally performed extremely well, gaining 32% of the vote, far above Macron’s own party on 15%. Macron then announced that he had decided to give the public the “choice of our parliamentary future”, stating that “France needs a clear majority in order to act with serenity and harmony."

Related article: How to start a business in France in 8 Steps

European election results do not always reflect who people would vote for in a legislative election; the people you want to represent you in Europe are not always the same ones you want running your country. But the threat posed by the National Rally to the ruling government is palpable. The last elections in 2022 only yielded a minority government for Macron, something that has increasingly shackled his legislative ambitions, and forced him to use controversial powers to push through laws.

Why Macron called an election

The French President seems to be hoping that a sudden election mobilises voters to band together to stop the threat of extreme factions. What this comes down to ultimately is a recognition that the situation for his party and himself was only likely to deteriorate. A previous motion of no confidence was submitted and narrowly failed, and it’s likely that opposition parties would have used more aggressive actions to inhibit the current government, including further votes of no confidence and censure motions. The elections are designed to head off a collapse of the government, which may put them in an even worse electoral position.

The extent to which this is likely to work is questionable. When he was first elected, Macron campaigned as a unity candidate who was France’s best bulwark against the far-right. As a pro-business centrist, he had relatively little appeal on the left, and many left-wing votes for his party only arrived in the second round. Rising taxes and the high cost of living drove the Yellow Vest protests in 2018, while his forcing through of a law to raise the state retirement age provoked widespread fury. Macron’s current approval rating is four points lower than during the Yellow Vest protests, where it sat at only 25%.

The aim in effect seems to be to secure an insecure transition. There is relatively little hope that his party will win, but the aim will be to open the possibility for another coalition government. Even if this is a National Rally government, the gamble is that they will not receive an outright majority in parliament, and will therefore struggle to implement their policies without the same kind of pushback that Renaissance have received. A party of perpetual opposition may struggle with the realities of being in government for the first time.

What this means for businesses

All of this may sound a bit chaotic, something that generally isn’t good for businesses. But after the dust settles, the picture may be more encouraging. Macron has been a pro-business president, enacting many laws which have benefitted growth and innovation, from changing working hours, to making it easier to fire badly-performing employees, to improving pathways for startup funding. Yet as much ire as these policies have drawn from across the political spectrum - including the National Rally - the threat may not be as great as it seems.

As far as its business policies go, the National Rally is generally considered to be protectionist, adopting an approach that it calls “economic patriotism”. What this may mean in practice is more state intervention in ensuring the success of French businesses, from the imposition of import tariffs, to tax cuts, to increases in public spending, all of which may actually help businesses established in France. While there is no certainty on the future of French entrepreneur visas, the impression is that outside investment in French businesses that contribute to the local economy would still be in favour.

Related article: The best place to start a business in the South of France

The biggest potential issue may be the party’s bid to cut immigration from outside the EU. However, the National Rally is no longer as eurosceptical as it once was, and has no plans to leave the EU or the Schengen area, which enables visa-free travel across borders. This means that businesses in France should still have an enormous pool of talented labour to choose from, and shouldn’t have to worry about the kinds of checks and expenses we have seen in the UK after Brexit.

The most likely scenario at the time of writing seems to be a narrow National Rally victory, and another minority coalition government. In that situation, a somewhat limited government is likely to maintain the status quo, and focus on more headline policies on immigration, crime and the cost-of-living than major economic changes. However, it would be fair to expect some fallout from a National Rally victory, which may present itself in some minor administrative difficulties during the transition to power, and potentially further protests in major cities.

The snap elections called by President Macron are a gamble, but one that may already be paying off. The left-wing parties quickly banded together to form an alliance, while the leading right-wing party fought over whether it should ally with the National Rally. The result may be an election in which votes are fragmented across a wide range of parties, leading to a coalition government under Macron as he serves out his presidency.

The result, rather than chaos, is likely to be minimal change. With bigger ideological battles to fight, it’s likely that the National Rally or any coalition they form is likely to leave businesses alone. The result may not be an ideal environment for businesses, but one that shouldn’t see any real impediments - more than might be said for other countries in Europe.

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