What is the current state of industrial dynamics in Europe?
All European countries have seen their share of industry decrease as a fraction of GDP. However, France’s situation has deteriorated to the greatest extent, with a negative trade balance compared to Italy or Germany, for example. In Eastern Europe, the manufacturing industry accounts for over 25% of GDP. However, the decimation of industrial jobs is due to the fact that service activities such as logistics and maintenance have gradually been subcontracted to specialist companies. These activities are classified as services by INSEE, France’s statistical office, but are largely the domain of industry.
The situation varies greatly from one country to another. In Germany, industry is considered a key activity. Faced with new players such as China and GAFAM, an Industry 4.0 roadmap has been developed. Italy, on the other hand, benefits from niche markets, and intercompany cooperation is strong.
We must be cautious when talking about reindustrialisation. The industry seems to have bounced back since late 2017, with the creation of jobs in deindustrialisation sectors such as the textile industry. Despite the economic crisis, this position has been maintained, thanks in part to measures put in place by the government. While modernisation, site extensions and relocations have occurred, the creation of new sites from scratch is rare.
What prompt relocations?
The economic crisis and supply disruptions, the increase in transport costs and environmental pressure are making companies rethink their industrial organisation. As a result, some companies are relocating to secure their supplies, reduce lead times, stock and dysfunctions. However, it will take time before we can see which relocations are sustainable, and which are just a flash in the pan. We really need to look at what causes deindustrialisation in the first place. Cost competitiveness has been mentioned a lot, but non-cost competitiveness, which involves innovation (in techniques, processes and marketing), agility, quality, delivery times, and the ability to involve clients in projects, is also a key factor. Add to this the fact that French industry is not very specialised, unlike Italy and Germany, where the industrial fabric is better maintained, and the industrial ecosystem approach is stronger.
Are medium-sized towns the best place for reindustrialisation?
This is true, to a certain extent. A lot of industrial companies have now relocated to medium-sized towns and can help rebuild productive ecosystems around them. Some medium-sized towns have a lot to offer: cheap land, an industrial culture and fewer flow constraints than in bigger cities. But there can be drawbacks, such as a dearth of skills linked to an increased use of data and high level of site digitisation. The small size of the employment market, or geographical isolation, can also reduce access to talents.
We should not underestimate industrial activities in dense urban areas, such as the textile industry, which is highly developed in the Ile de France region, especially in Paris and in the Seine-Saint-Denis area. The Lyon metropolis with its chemical industry, is an example of a suburban area with a strong specialist field, which makes it very attractive.
What makes a place more attractive for relocation?
There is no single answer. Among attractive factors, we can list the industrial culture of the place, the local players´cooperation to common solutions, the strength of the local ecosystem and the ability to interact with neighbouring areas. Other factors include skills, the size of the employment market, geographical location, and access to logistical hubs and high-speed Internet. Also worth mentioning are infrastructures and natural resources. Public aid also plays a part, especially for projects where European countries are in competition. Cooperation between players may not be the main factor of appeal, but it is a one of territorial success. The most dynamic industrial places today are often those where public and private actors cooperate effectively.
Are brownfield sites an asset in the era of Zero Net Artificialisation?
France’s reindustrialisation will increase a need for sites, so it’s worth converting former industrial sites to set up new factories. Reindustrialisation should not just be about factories, but also deal with essential infrastructures, increased logistical flows, and growing needs for storage – logisticians have a role to play in reindustrialisation.
Several issues are at the core of soil artificialisation. The first long term consideration is land use planning. We also need to reflect on production methods, since climate crisis calls for an overall rethink of the way we produce, the nature of products, and consumption patterns. Although industry is often singled out as a source of pollution, it is not the primary cause of soil artificialisation. This is due to construction of individual housing and infrastructures, which calls for systemic intervention.
Can mainland France host “mega-sites”?
In principle, yes. But building up new sites in France is always challenged. We need logistics to serve industry, especially “mega-sites”, such as the those that Tesla is building for its car industry. Industrial projects are still beneficial in terms of value and job creation, for the knock-on effects they bring. Also, jobs in industry are often better paid and of higher quality than jobs in logistics.
The appeal of “mega-sites” is also based on available skills and the price of land. Tesla chose Germany over France, as the range positioning of German manufacturers seemed to offer a larger pool of skills, especially where engineering is concerned. The proximity to Eastern European countries, which play a prominent role in Germany’s industrial strategy, may have been another asset.
For a project like this one, several sites usually compete on a European scale. That’s why we need to reinforce our economic intelligence strategies and speak with one voice when it comes to attractiveness and investment.
This article was published as part of the December 2021 Leonard newsletter: “Reindustrialisation: industrial renaissance ahead? » Find this newsletter in its entirety here and subscribe to receive future ones by following this link.
