France succumbs to lure across Channel

Almost two months ago, when a French businessman by the name of Olivier Cadic announced that he was moving his small hi-tech company to Britain because of lower taxes and more flexible labour laws, there was evidence that he was by no means the first French entrepreneur to have reached this conclusion. He was merely the first to make his decision, and his reasons, public.

Now, in a carefully packaged set of articles, the Figaro, a staunchly pro-government newspaper which (like the rest of the French media) barely noted Mr Cadic's decision at the time, has admitted the scale of France's problem, and Britain's gain. No fewer than 1,200 French companies, it says, have set up operations of one kind or another on the other side of the Channel. In a delicate turn of phrase it describes France as the "third largest foreign investor in Britain, after the United States and the Netherlands".

Small business is not the only sector to see advantages across the Channel. The paper also reported that between 10 and 15 per cent of French financial business has moved to London in recent years, and it quoted an unnamed senior French banker as predicting that if Britain were to join the single European currency, there would be a massive transfer of French banking and broking operations across the Channel.

At present, the banker was quoted as saying, French banks themselves were not relocating and mostly they were not sending their own staff abroad because expatriate packages were too expensive. They were transferring certain operations to Britain and recruiting local staff, recognising that "London has the best sales and trading teams and the best support staff". It did not say, but made clear, that this could include French traders who had chosen to move.

The reporter said that the high national insurance contributions (for employer and employee) and high tax rates were to blame for France's loss. He calculated that a trader in Britain who had earned a bonus equivalent to 1m francs would be able to keep half of it. In France, he would keep only 325,000 francs and the employer would have to pay the government 450,000 francs on top of the 1m francs in "social charges". "The competition," another French banker was quoted as saying, "is becoming absurd."

"Why stay in France if conditions for entrepreneurs are better in Britain?" Figaro asked, saying that the public decision of Mr Cadic to move to Britain had prompted a real debate. What the paper did not say is that any debate has so far been conducted entirely behind the closed doors of government offices; there was no trace of it in the media until now.

French business leaders, the paper said laconically, had tended to be "discreet on the subject of Britain's business advantages for image reasons". The publication of its page on "French companies tempted by Britain" suggests that it is now open season on a question that has previously been too bound up with loyalty and patriotism to be broached.

Trying also to put the other side of the equation, one reporter noted that Britain had disadvantages. They included a decline in company loyalty among employees, the proliferation of short-term contracts, worse conditions of service, lower investment by companies in training, a generally less well qualified work force and a neglected infrastructure (especially roads and public transport).