Via Financial Times

Justine Hutteau embodies the entrepreneurial spirit that France hopes can flourish. Little more than 18 months since the 25 year-old’s natural deodorant brand went on sale, the business has expanded its workforce from two to 16.

“We aim to launch a new product each month,” said Ms Hutteau, co-founder of the company called Respire. “Our vision is to be the number one natural hygiene brand in Europe”.

As strikes over pension reforms have brought disruption to public transport and put the government of President Emmanuel Macron on a collision course with trade unions, her ambition attests to another force that is playing out in an economy long perceived as lacking dynamism.

The number of businesses being created has surged since Mr Macron came to power with a pledge to overhaul the economy, reaching almost 809,000 over the past 12 months. This is up 45 per cent compared with the year before the former banker took office in May 2017.

There have been sharp rises in businesses created in areas such as transport and storage, real estate, manufacturing and business support services, according to data from national statistics agency Insee.

For some observers, the explosion is connected to government policies to slash red tape, reduce taxes and encourage innovation.

“It reflects a lot of reforms that have been going on not only under the Macron government, but even under earlier governments, that aimed to give more support to entrepreneurship and more flexibility to the labour market,” said Daniela Ordóñez, chief French economist at Oxford Economics.

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Among the measures are state financial assistance and special visas for the technology sector to attract talent. In the first half of 2019, French start-ups raised a record €2.79bn, up 43 per cent on the previous year and higher than Germany.

Beyond an easing of the bureaucracy and high costs that France has traditionally placed on businesses, the trend also points to shifting cultural attitudes towards work and entrepreneurship.

Once a land of artisans, farmers, skilled professionals and sole-traders, the number of French petits propriétaires — or smallholders — was in decline until about 20 years ago as salaried jobs became the norm, according to Institut Montaigne, a free-market think-tank.

Today, as Institut Montaigne wrote in a report this year, “we’re experiencing a renewal of self-employed activity” that is “once again an ideal for many French people”.

Justine Hutteau, co-founder of the natural deodorant brand Respite
French entrepreneur Justine Hutteau co-founded Respire just over 18 months ago

Gilles Moec, chief economist at insurer Axa, said buoyant construction activity and a rebound in tourism have contributed to the business registration figures. “The immediate cause over the past two-to-three years is the change in the rules to register as a micro-entrepreneur,” he added.

The status, created more than a decade ago, is open to individuals and offers simplified registration and tax benefits. Revenue ceilings were doubled at the start of 2018, which economists say has recruited an army of micro-entrepreneurs.

They have accounted for more than two-fifths of the new businesses registered throughout the Macron presidency and already represented one-third of the 3.2m people in France with some form of self-employed activity outside agriculture by the end of 2017, according to Insee.

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An attraction is that it allows jobseekers to pursue an activity without giving up all unemployment benefits, while people already in salaried job can more easily earn on the side.

Stephanie Guainebe struck out on her own as a micro-entrepreneur after three years of working as an administrative assistant for a tradesman in her home city of Orléans.

“I wanted to be my own boss. I was tired of not being recognised for my work,” said the 45 year-old, who provides outsourced office management and secretarial work, as well as lessons at an educational institute.

Although in her first full year of self-employment she will earn a similar amount to her previous salary of €15,000, Ms Guainebe has already signed contracts worth €50,000 for the future.

While Mr Macron can boast of a near-decade low in unemployment, at 8.6 per cent, the rise of micro-entrepreneurs has however sparked anxiety about a creeping “gig economy” of low-paid, unskilled work and fewer rights, inhabited by the likes of Uber drivers and fast-food couriers.

Eric Heyer, a director of the French Economic Observatory at university Sciences Po, said many people have in effect simply switched from employment to freelancing to benefit from more favourable tax treatment, without any real difference in the nature of their work.

“There is an increase in businesses, but when we look at the details there are more micro-entrepreneurs and they often do not last that long [in their new roles],” said Mr Heyer added. “The main winners are the highly paid employees who can complement their salary with a second source of revenue”.

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He added: “In the short-term, everyone wins. Afterwards, the problem is that you are less covered. You pay fewer [social] contributions, you have less rights to unemployment and pension benefits. Overall, it is a legal way of getting around the French social model.”

In the longer run, the challenge for France is to generate more value from its smaller and medium-sized buinesses and help start-ups to grow. “We will need to assess [companies’] survival rates and their capacity to add jobs,” said Mr Moec at Axa. “But the change is already tangible.”