Rising commodity prices, rising fuel prices, rising gas and electricity bills…price pressure has increased significantly in recent weeks. Russia’s invasion of Ukraine has created a series of upheavals in the French economy, destabilizing supply and demand in many sectors. After two endless years of the pandemic, even though most of the “at any cost” measures have managed to limit the damage to the tricolor production structure, in many sectors the level of activity is lower than before the crisis. In the domestic sphere, the war in Ukraine is already having far-reaching consequences for the everyday life of the French.
Even if it is too early to assess the full consequences of the war in Ukraine, some companies in industry, construction, agriculture or agribusiness are very vulnerable. Faced with a downturn in activity, what is the financial position of businesses and households? In a cautionary tale released by the Council for Economic Analysis (CAE) on Tuesday, March 22, economists scrutinized the financial performance of nearly 130,000 companies (70,000 VSE, 25,000 SME and 20,000 ETI) between November 2019 and February 2022. .
As for the impact of the war on the financial health of businesses and households, experts say it is “too early” to have reliable data yet. Recent studies of business trends by Insee and Banque de France among households and business leaders, as well as other work by economists, however, show that this conflict at the gates of the European Union could hurt the European economy.
Thanks to “by all means”, the financial condition of companies is better than before the pandemic
In the spring of 2020, the executive branch quickly implemented a whole arsenal of measures aimed at supporting the cash flow of companies (a state-guaranteed loan, a solidarity fund, partial unemployment, deferred payment of contributions and the abolition of certain fees). “For companies in the pre-crisis period, the situation is generally favorable, whether it is cash or bank debt,” summarizes the economist and co-author of the note, Etienne Fiz, in an interview Gallery.
This general observation masks some differences between sectors. “While the manufacturing sector behaves similarly with all sectors, we note a generally more favorable situation for accommodation and catering, and slightly less positive, for example, for construction or transport,” researchers say.
As far as construction is concerned, the situation is particularly critical here. During a recent press briefing in Bercy, the President of the French Building Federation (FFB), Olivier Salleron, sounded the alarm. “We’ve taken three blades in two years with the pandemic, economic recovery disruption and war leading to shortages of certain products. The third shock could be devastating in terms of business and jobs,” he warned.
According to the CAE, the EMPs were “well targeted”.
Companies made extensive use of government-guaranteed loans in France. According to the latest estimates, nearly 140 billion euros have been received by about 690,000 companies since the start of the health crisis. “IMost of the companies using PUE experienced difficulties even before the crisis. This means the EMPs were well targeted. […] Between January 2021 and February 2022, total outstanding PGE in France decreased by 15%.” adds Etienne Fizet.
Of the entire sample, the first thing to remember is that the vast majority of companies (64%) did not apply for PGE between January 2021 and February 2022. Among those who used this tool, 15% repaid partially (11%) or fully (4%) these loans. As a result, companies that have signed a contract for PGE are in a more unfavorable financial position than those that have not applied for it. In addition, there are strong disparities between sectors. “For example, total PGE debt fell by 20% in manufacturing and remained almost unchanged in the accommodation and catering sector,” highlights the think tank attached to Matignon.
Among households spending little after two years of the pandemic
In the first two years of the pandemic, the French have accumulated a ton of savings, estimated at 134 billion euros in 2021, after a record 2020 of 184 billion euros. These levels remain sky-high compared to 2019 (67 billion euros), according to Banque de France. The various waves of infection and lockdown over the past two years have clearly prompted the French to keep a large reserve of savings as a precaution.
In addition, it should be remembered that during various restrictive measures, consumption was largely “warned” by the deterioration of health. “As for households, additional savings are still above pre-crisis levels, but there has been a slowdown since the summer of 2021,” notes Etienne Fizet. “Here again, there are disproportions depending on the category of the household. Between the first and ninth deciles, households began to reduce their additional savings, and even in the first two deciles, households regained a level of savings comparable to the trend. before the crisis. Last decile incremental savings still above 2019 levels.” says the economist.
After examining Credit Mutuel’s data more closely, the researcher notes that “Savings behavior varies greatly by category. Households in the first deciles mostly saved in liquid savings products (checking accounts, passbook A, popular savings account). Conversely, households in the bottom deciles instead invested in life insurance or securities accounts, for example”. Given the prospect of a protracted war in Ukraine, the French will no doubt be waiting to spend their woolen stockings.