As regards nuclear power, there is even a decline in production, with a peak observed in 2005. Investment in new capacity has been rather limited and concentrated on renewable energies. In fact, the nuclear production potential is rather old, with plants built for the most part 30-50 years ago. As a result, the increase in renewable energies is already unable to compensate for the recent decline in nuclear power generation. The ageing of the nuclear production potential already represents a cost: it required the increased use of more polluting thermal energy (coal and gas power plants) during the winter of 2022 and pushed up the cost of KwH, an effect that could be repeated in the future and limit the competitive advantage that France had, thanks to nuclear energy, with regard to the production cost of its electricity.
France will therefore need to make substantial investments. For example, the planned construction of six new EPR nuclear reactors is expected to cost almost EUR 50 billion.
At the same time, the current rise in construction costs may complicate investment efforts in renewable energies in the short term, with, for example, +33% y/y in April 2022 for maritime civil engineering works and +15.5% for land-based metal structures, according to Insee, complicating the implementation of these projects.
Maintaining France's position in the concert of nations
The feeling that France is in decline has often accompanied its history over the last 20 years. In fact, this period has seen a marked decline in the share of industry in GDP, which was seen as a driving force behind the success of the dominant exporting nations (Japan, Germany and South Korea in particular), all of which have retained a sizeable industrial sector. Among the elements that could justify a relative disadvantage for France, the cost of labour and corporate taxation have been cited in the past. Progress has been made but it is still partial. It may be necessary to reduce the tax burden on French companies even further in order to bring it closer to that of their European competitors, especially Germany. However, in order not to worsen the public deficit, this will require budgetary savings, which will be made possible by reforms capable of reducing the extent of public spending in the economy: an initial objective of the previous mandate in 2017, but that the 'whatever it takes' approach has forced to be put on hold.
Industrial renewal: a challenge of scale
Corporate investment is the demand item that has shown the earliest rebound post-Covid. This can be explained by the difficulty that companies have in meeting demand and by the need to develop their production capacities. Indeed, they are facing ongoing supply problems. Supply chain difficulties are one manifestation of these supply constraints, while recruitment difficulties are another.
As measured by order books, demand is now similar to 2018, despite the slight decrease in order books due to the decline in household consumption since the beginning of 2022. Industrial production capacity, on the other hand, is still quite significantly lower than in 2018 (Chart 14)9. The Covid-19 crisis has in fact undermined the initial results obtained between 2016 and 2018 in terms of reindustrialisation. The initial shock (from pre-crisis level to trough) generated by Covid-19 on production capacity appears to be of a similar magnitude to the 2008-09 crisis (a gap between the pre-crisis level and the trough of the curve that follows). Its ultimate net effect can be understood as the gap between the pre-crisis level of production capacity and what it is at the end of the crisis. Yet, this gap is smaller following Covid-19, compared to what had prevailed in 2009. This is a sign of the effectiveness of the 'whatever it takes' approach: in particular, the deferral of charges, cash-flow support and short-time working measures have helped to safeguard companies and thus reduce the risk that the mothballing of activities linked to the lockdowns will not be transformed into permanent destruction of capacities.
The role of crises in deindustrialisation and the difficulty of recreating these activities afterwards are such that they justify the policies implemented. However, production capacity has decreased and some sectors such as metallurgy, paper/cardboard, and plastics/rubber, have reported a lack of production capacity post-Covid in a context of high demand. This gap has resulted in a low inventory level, which still persists in the plastics sector (Chart 15).