Lockdown Economy France

During the last five years, the economy of France faced major transformations. According to the European Commission (EC) Country Report, the country experienced strong growth in 2017. However, the situation changed in 2018. In the first half of the year, strikes in the transport sector and climate temperature alterations caused negative impacts on consumption. By the end of the year, the main obstacles were the social protests, when the consumption levels were interrupted in their progress again [1]. 

In 2019, the country adopted fiscal measures to increase private consumption such as providing tax breaks to improve purchasing power. In addition to these plans, policies oriented to link training and education systems to the labor market needs were planned. Nonetheless, the results obtained were diverse. Consumption levels have grown due to the actions taken by the government, in addition to lower levels of inflation and unemployment. Despite that, the number of unemployed people has increased, mainly in disadvantaged social stratums. According to the EC Country Report of 2020, this situation was related to low skills, which could be improved by investments in the skill development area [2]. 

In 2020, another external factor came to affect the French economy: the COVID-19 pandemic. From 2017 to 2019, the GDP had reduced. But the recovery forecast for 2020 – after the application of the mentioned policies and investments – did not live up to expectations because of the health crisis and the lockdown policies that reduced physical contact during the pandemic.

Small businesses and self-employed professionals suffered the impacts of the pandemic in a stronger way, which increased social inequalities. Micro, small and medium-sized enterprises (MSMEs) are the backbone of the continent’s economy [2] and represent 99% of the entrepreneurship in Europe. In 2021, the scenario is still similar. In France, the role of small businesses is essential. 

In this article, we outline the key challenges of small businesses in France based on the Lockdown Economy, the field research by the Think Tank AlterContacts, where entrepreneurs shared their journeys through the pandemic in open interviews. 

How to handle new terms

The first challenge for small businesses in France, besides the pandemic itself, has been adapting to the new conditions. This occurred especially due to the lockdown policies, applied at the beginning of the crisis in 2020. The drastic reduction of physical movement had directly affected businesses whose main product was a face-to-face experience. Thus, these new conditions caused anxiety and increased the unpredictability of the market.

When lockdown policies were implemented, the most obvious response was to migrate the businesses to a digital environment in order to continue offering products to the public. This change was not easy to manage, since it involved transforming the way clients and small enterprises communicate, the place where people can find the product, interactions in sale transactions, the provided experience itself, and other decisive factors.

For many entrepreneurs in France, the main challenge of the period was deciding what to do with the new terms presented. Some of them tried to wait for the market and client’s reaction in the face of the pandemic before taking any decision [3]. Meanwhile, they tried to step back and rethink the tools and methods used to reach their business objectives. For these enterprises, a crisis could also show an opportunity to build new strategies.

Another way to look for solutions has been to invest in communication with the public that needed to stay home and comprehend their needs [4]. For this tactic, social media use, as well as digital marketing strategies were essential. During the lockdown, these resources became a key for entrepreneurship in France in many sectors, including the ones oriented toward tourism and gastronomy.

Policy Insight

Despite this challenge, the French government has supported small businesses in a series of efforts that are worth mentioning. The first action was to keep people aware of numbers and other relevant information about the pandemic and its surrounding scenarios. It also increased financial benefits to small businesses to ensure their survival during the crisis [5]. These resolutions were decisive; because of them, small entrepreneurs could have the time to plan any necessary transformations.

When crises like the COVID-19 pandemic occur, there is a tendency for inequalities in society to increase. This is bad for the country’s economy and for people’s lives. On a global level, inequality of growth can also cause a rise in poverty, going against Sustainable Development Goals (SDGs). This makes the importance of the needs and assistance given to small businesses of paramount importance. 

Technical expertise and its benefits

One of the most challenging transformations for small businesses during the pandemic was how to transfer their activities to an online platform when earlier, they were used to running all these actions in person. For example, the owner of a travel business in France interviewed by Think Tank AlterContacts stated that she never planned to be in the digital world because the face-to-face experience was their main goal [5].

However, the same entrepreneur highlighted that as they continued to wait for the situation to get better, she realized that face-to-face service was no longer an option [6]. So she decided to adapt to the situation. She reconsidered the tool they had until then, started a website, and expanded into social media. But digital marketing is different from the presential one, and that was the first deadlock.

For many entrepreneurs, questions appeared around the expectation of what kind of products could be offered, and how such an online experience could satisfy the customers. The answers were not simple, but the initial step-back moment was essential for studying and deciding the next stages of the adaptation process. In 2021, one of these French entrepreneurs told Lockdown Economy that they are still learning [7].

Policy Insight

Fortunately, the French government was supportive, and its subsidy programs declared reported in the European Social Policy Network, were crucial to the moment enterprises had to stop their in-person activities [8]. As told to the Lockdown Economy, at moments like these, the first tendency is to react immediately. But rethinking and reorganizing plans take time [3]. The support of public policies is the ideal response to this collective need.

From that, working on offering new products or redesigning the current ones can be the next step. At this point, communication with the public is essential and will offer the possibility of building evergreen products that can be offered even after the crisis [7]. The proposal is to build a business system that is a bridge between remote and face-to-face experiences, without excluding one or another.

Additionally, education and training are a part of both the SDGs and the French policies that improve the economy and labor market. Investing in future employee training can decrease the inequalities, as well as offer seasoned professionals and entrepreneurs to the market. The benefits can expand across borders and become a global example of adaptation to the pandemic. It can also propel serious work in education and increase economic growth.

Visibility matters

When a big company needs to change its production model or its marketing strategies, there is a sector-oriented function, where specialized employees will do their maximum to reach the business goals with the best tools they have. Even with similar objectives, in a small business, things do not happen the same way. Developing a small enterprise takes time and real work, in general, from few people.

Any change in the scenario that the business was consolidated can be decisive to its future. Location, one of the marketing pillars, is a good example of this. To gain an audience requires building visibility not only for the product but also around where it can be easily found. In that way, French small enterprises really suffered the negative impacts of the social distancing policies.

The reinvention process for these businesses takes time, and so does the reconnection with the customers. During the lockdown, and even after the advent of the "new normal", small enterprises must still work hard to win over the preference of the public. In France, the main challenge in this regard is how to reach clients who were previously used to business in person. 

Policy Insight

There is no specific effort registered by the French government, oriented to work toward small businesses visibility, despite it being a real concern for entrepreneurs. Considering the SDGs, not giving adequate attention to this point can contribute to an increase in inequalities and a decrease in economic growth in the long term. Not only government authorities, but international organizations should help in it.

Entrepreneurs need to be listened to in order to offer better products to society. Initiatives such as Lockdown Economy, where people representing these small enterprises can speak and be heard in their experiences are relevant. As one of the interviewed entrepreneurs said, “there is a place for many businesses in the market, but they need to be seen. And it can be built by community sense” [7].

Given the importance of these companies for the French economy, it is also crucial that, aside from independent initiatives, the authorities work together with firms to publicize and promote their products, and encourage the public to buy and enjoy their services. Furthermore, the dissemination of small businesses on social media and the maintenance of the benefits to these ventures are also valid actions.

Building networks

The market is an unstable environment, where enterprises usually compete with each other. In the Lockdown Economy interviews, the Think Tank AlterContacts asked entrepreneurs about the current state and plans for the coming months, including relationships with business partners and competitors. The answers were diverse but revolved around two topics.

The first one, related to the present, showed that entrepreneurs are worried about understanding the pandemic crisis and how they can fit in the "new normal" with their businesses [9]. Learning and keeping aware of the current transformations is important. However, building a strong network, a sense of community, can be transformative. One of the entrepreneurs also said that they do not have competitors, but colleagues in the profession [4].

The second question, about the future, had been answered with the same uncertainty that they have gotten used to in 2020 and covered short-term plans only. Living in the present and being creative to elaborate solutions for new situations has changed the mindset of these French entrepreneurs. This is one of the most challenging needs of all the pandemic moments for them.

Policy Insight

According to their narrative, France is the land of small businesses. Internal policies allowed entrepreneurs to learn from each other, establishing connections in a timely manner, without the need for an immediate individual response. Due to COVID-19, a part of these public policies could not be implemented at the optimum level [10], but keeping this approach can make recovery easier and faster.

Though the crisis, decisions must be taken based on a short-term perspective, centered in the present, the lessons will be kept for the long-term. The sense of community, network, and dialogue made entrepreneurs reach surprising goals. New clients were discovered. New objectives were set, and the will to develop new evergreen products continues. The problems arising from the pandemic are undeniable, but they can also present opportunities.

CONCLUSION

France has faced many adversities in the economic sector during the last years, but COVID-19 has been the most challenging one for the country and especially for small businesses. Surely, the current policies can be improved according to the new needs, but the plans oriented to this exist [10]. Naturally, the actions need time to show results, and positive changes can come from them.

The real losses for the French economy can only be partially seen now since the pandemic is not over yet, but the knowledge acquired from the new routines and environments, and the fresh projects will remain. As one of the entrepreneurs told Lockdown Economy, “all these feelings and experiences are essential to the entrepreneurial spirit in all businesses, especially the small ones.”

Written by Whitney Santos Cabral, a Professor of International Trade and a researcher in public and international policies at Federal Institute of Amapá, Brazil

Edited by Steffi George Manavalan

Editor-in-Chief - Julia Skupchenko

REFERENCES

1 - European Commission. Country Report France 2019. Including an In-Depth Review on the prevention and correction of macroeconomic imbalances. Available at https://ec.europa.eu/info/sites/default/files/file_import/2019-european-semester-country-report-france_en.pdf

2 - European Commission. Country Report France 2020. Accompanying the document. COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP. Available at https://ec.europa.eu/info/sites/default/files/2020-european_semester_country-report-france_en.pdf

3 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown in a Cooking School with Jane Bertch. Small Businesses Respond to Coronavirus COVID-19. Available at https://www.youtube.com/watch?v=4BmrG0p_7YM

4 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown in a Digital Parenting Consulting with Elizabeth Milovidov. Small Businesses and COVID-19. Available at https://www.youtube.com/watch?v=wktzLyotSfg

5 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown in a Travel Business with Dr. Monique Y. Wells. Small Businesses Respond to COVID-19. Available at https://www.youtube.com/watch?v=-KyVgJgmH1I

6 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown Economy France in a Travel Business with Dr. Monique Y. Wells. Follow-up. Available at https://www.youtube.com/watch?v=QdtEBEpY8_k

7 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown Economy France in a Cooking School with Jane Bertch. Available at https://www.youtube.com/watch?v=LdSlgf9tSKQ

8 - Social protection and inclusion policy responses to the COVID-19 crisis: A Synthesis Report has been produced by the European Social Policy Network (ESPN). Available at https://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=10065&furtherNews=yes

9 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown in a Gamified-Training Consultancy with Nadia Benedetti. Small Businesses and COVID-19. Available at https://www.youtube.com/watch?v=rKQbDTTFYRw

10 - European Commission. France Economy Forecasts Summer 2021. Available at https://ec.europa.eu/economy_finance/forecasts/2021/summer/ecfin_forecast_summer_2021_fr_en.pdf

European Commission. In-Depth Review for France in accordance with Article 5 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances 2021. Available at https://ec.europa.eu/info/sites/default/files/6_en_autre_document_travail_service_part1_v4.pdf

World Bank. Global Economic Prospects June 2021: A World Bank Group Flagship Report. Available at https://openknowledge.worldbank.org/bitstream/handle/10986/35647/9781464816659.pdf