France is less appealing to multinational investors due to margin pressures, the social and political climate and the cost of labour, a survey shows.

Ilec (l’Institut de liaisons des entreprises de consummation), a French trade association representing consumer brands like Diageo and Campari, published a “barometer of the attractiveness of France for the consumer products sector”.

Produced in partnership with EY, the survey said one in six FMCG companies, both from France and elsewhere, would consider closing production sites in France over the next three years. Four out of ten said their parent company has refused an investment project in France, due to the level of margins, the social and political climate and the cost of labour.

Ilec said the profitability of companies in the FMCG sector there is “generally lower than that of other French industries”.

Asked to compare France to other European countries, respondents said the country’s most attractive qualities were its geographical location, quality of life, the “presence of an ecosystem of suppliers”, security of supplies, the ease of finding skilled workers and the relative availability of land.

The main weaknesses were singled out as “poor quality of commercial relations” and the cost of labour.

“The consumer goods industry is a pillar of the daily life of the French and the French economy. With 1.8 million employees working there, it has considerable potential for reindustrialisation, export and innovation,” Marc Lhermitte, senior partner at EY, said. 

“However, France’s attractiveness to parent companies has clearly weakened, which generates real risks of site closures and prevents France from attracting more factories and R&D centres.” 

Sixty per cent of the investment projects of French FMCG companies and 51% of those of foreign companies in the sector benefited municipalities with less than 20,000 inhabitants, according to the trade group.

Richard Panquiault, president of Ilec, added: “The results of the barometer and the EY survey underline the need to work on fundamentals capable of stemming a loss of attractiveness of France in a sector which represents 2% of GDP. 

“It is becoming urgent to re-weave the link between the consumer products industry and France, by eliminating the elements affecting the competitiveness of our companies.”

The FMCG sector in France has hit mainstream headlines this year due to tension between the industry and government over inflation.

Last month, a report by UK Tory peer Lord Harrington stated that the UK needs to change its approach to attracting FDI in light of “more strategic and better organised” international peers and greater competition for global investment.