France is facing a severe entrepreneurial crisis, with over 66,000 businesses shuttering in 2024, threatening about 260,000 jobs. Small and medium-sized enterprises are particularly affected, experiencing a 51% rise in bankruptcies. Economic analysts express concern over the high-interest rates and sluggish demand impacting resilient firms. Predictions for 2025 suggest a further increase in defaults, exacerbating the challenges for the entrepreneurial ecosystem amid political and economic uncertainties, with larger companies also feeling the pressure.
France Faces an Entrepreneurial Crisis
In 2024, France experienced a significant wave of bankruptcies, with a staggering 66,422 companies closing their doors, jeopardizing approximately 260,000 jobs. This unprecedented situation marks one of the darkest periods in the country’s economic history since 2009, driven by the ongoing effects of the Covid pandemic, rampant inflation, and escalating credit costs.
Impact on SMEs and Mid-Sized Companies
The repercussions of this crisis hit small and medium-sized enterprises (SMEs) and mid-sized companies the hardest. Defaults in these sectors surged by an alarming 51% compared to 2019, affecting over 5,265 businesses. Notably, firms employing more than 100 workers saw a staggering 57% increase in bankruptcies, raising concerns among economic analysts.
Alain Tourdjman, the head of economic studies at BPCE, characterized the situation as “serious,” emphasizing the concentration of defaults in businesses that typically demonstrate resilience. These companies are vital to the French economy, and the combination of high-interest rates and sluggish domestic demand has severely hindered their operations.
While the prospect of losing 260,000 jobs looms large, it’s important to note that not all bankruptcies lead to the complete demise of companies. For instance, the recent acquisition of the Naf Naf brand by Turkish group Migiboy Tekstil showcased a successful rebound, saving 521 jobs and highlighting that recovery is possible.
Challenges Ahead for 2025
The optimism that the “whatever it takes” policy brought between 2020 and 2022 is now fading. As state aid diminishes, many companies are finding state-guaranteed loans (PGE) increasingly burdensome. Additionally, Urssaf has resumed its standard procedures, adding to the challenges faced by entrepreneurs.
Several sectors are disproportionately affected, particularly construction and real estate, where rising credit costs are taking a toll. Transport, storage, and business services are also grappling with significant challenges, further complicating the landscape for these industries. Conversely, newer companies, having been established for less than three years, account for only 18% of defaults, and sole proprietors appear to be managing somewhat better than expected.
Looking ahead, 2025 is projected to be even more challenging, with predictions indicating defaults could reach 68,000, a 2% increase from 2024. This new wave of bankruptcies may extend from SMEs and mid-sized companies to their smaller subcontractors, intensifying the fragility of the entire entrepreneurial ecosystem. Experts anticipate that any positive turnaround might not arise until late 2025 or early 2026.
Political and economic uncertainties continue to cloud the decisions of business leaders, with 2024 witnessing a sharp decline in investments and constrained company margins. According to economist Julien Laugier from BPCE, even larger companies are now feeling the strain, underscoring the widespread vulnerability of the French economic landscape.