Corporate France bids adieu to Emmanuel Macron’s pro-business agenda

France’s corporate leaders are preparing to say au revoir to a decade-long business-friendly climate after President Emmanuel Macron’s snap legislative elections resulted in a hung parliament.

Many executives breathed a sigh of relief on Sunday after seeing the far-right party neutralised in a new National Assembly in which no political grouping has a clear majority. But the feeling was quickly replaced by unease that the victory of the left, which has radical tax and spend plans, or political gridlock would derail market-oriented reforms made under Macron.

“We need to wait, but we are all worried,” said a business lobbyist. “We were on the right path.”

Executives have benefited from a pro-business drive initiated by Macron, beginning in 2014, during his stint as economy minister, and continuing with his move to the Élysée in 2017. They were taken aback by their champion’s decision to dissolve the National Assembly following the disastrous performance of his party during the European elections in June.

Over the past four weeks, business leaders have had to contemplate the possibility of a protectionist, Eurosceptic far-right government. Some executives even courted Marine Le Pen’s Rassemblement National.

While the leftwing alliance Nouveau Front Populaire, which came in first on Sunday, has fallen short of a majority, executives are worried about a future government more inclined to levy taxes on companies and the wealthy, and place added pressure on the state’s already bloated finances.

On Monday France’s employers trade association, Medef, said the policies conducted under Macron had “produced results in terms of growth and jobs” and needed to be “pursued and amplified”.

The chair of a manufacturing group that forms part of the benchmark Cac 40 stock index described his mood as “both relieved and worried” after efforts to curb the RN from winning a majority of seats in parliament, through tactical voting, succeeded.

Like many of his fellow citizens, the executive backed the leftwing alliance to bar a far-right candidate from winning his constituency. His satisfaction gave way to deep displeasure, however, when Jean-Luc Mélenchon, head of the alliance’s far-left member La France Insoumise, boasted he was the elections’ winner.

“What got my goat up is that people like me who voted for NFP to block the RN, then had to watch Mélenchon claim victory barely five minutes after the polls closed,” he said.

Just before Macron called early elections, his government passed one last package of pro-business measures, signed into law by the president right after calling the ballot.

The so-called attractiveness bill included the introduction of multi-voting rights as part of initial public offerings — a rule designed to help Paris compete for listings with the likes of Amsterdam by helping entrepreneurs protect control of their groups.

The government led by Prime Minister Gabriel Attal also included a cap on the redundancy payouts for highly paid traders, which big Wall Street banks in Paris had pushed for, warning they would stall recruitment drives without one.

Under Macron, banks including Bank of America, JPMorgan Chase, Citi, Goldman Sachs and Morgan Stanley have moved hundreds of bankers to Paris, lured by the French capital’s lifestyle as well as its tax breaks for expatriates.

France’s largest companies have less to fear. Those that make up the Cac 40 generate, on average, 80 per cent of their revenues abroad.

However, a burgeoning tech sector is worried Macron’s efforts to build a “start-up nation” might be reversed by parties that care little about innovation.

“We are relieved that the far right and far left did not secure an absolute majority, and we’re monitoring potential coalitions — but there are risks that come with the extremes on both right and left,” said Philippe Corrot, co-CEO of French cloud-based ecommerce unicorn Mirakl.

The chair of the manufacturing group said there was “a good chance” the leftwing alliance would come unstuck within weeks. “Bottom line is we’ll probably end up with a centre-left government,” he said. “That will mean little further progress on structural economic issues of France.”

He pointed to former Socialist president François Hollande’s comments on Sunday night about abolishing the flat tax and reversing the wealth tax reform — two markers of Macron’s business-friendly reforms.

Others worry about markets forcing financing rates up, which would have consequences on companies’ ability to fund growth and investments.

Michel de Rosen, chair of car parts supplier Forvia, said companies have been in wait-and-see mode and halted investment decisions between the snap election and the European election just beforehand, a state of hesitation “which is not good for the economy”.

The leftwing bloc’s economic programme, or a blocked parliament, could also weigh on public finances, he said. That, in turn, could raise the government’s borrowing costs — increasing interest rates for businesses too. “Many small to medium-sized companies are much more dependent on the French market, if you increase rates, or taxes or salaries, it can create a very difficult situation for them,” he said. “We could enter a spiral of recession and unemployment.”

Others are less gloomy. A large tech investor remarked that markets had brushed off Sunday’s elections results. With 74 seats, Mélenchon’s anti-capitalist party was more or less at the same level as during the previous legislature, he noted.

He even saw positives in parliamentary paralysis. “The lack of new laws, stability, is very good news,” he said, adding that it was not politicians that made the economy grow.

A top investment banker also pointed out that the far left was unlikely to dominate any government for now. French business leaders, as most of their compatriots, were about to focus on Paris playing host to sporting glories.

“The Olympic Games are around the corner,” he said. “Everybody is going on holiday in August, everybody is going to take a break from politics.”