A violent economic shock but companies remain fairly resilient
Despite the violence of the economic shock, the productive fabric remains largely intact thanks, in particular, to the effectiveness of direct State aid (provided, in particular, via short-time working measures and the solidarity fund) and debt-driven support (bank loans, and social & fiscal relief).
The protection of employment, i.e. the ‘labor’ factor, the maintenance of the investment rate (the ‘capital’ factor) and the expected positive impact of the recovery plan on innovation (and, consequently, on ‘total factor productivity’) suggest a resilience in companies’ potential growth. More particularly, direct aid has supported VSE and SME results, which progressed overall in 2020 including in some of the sectors most affected by the crisis.
There has been a strong recovery in demand in recent months, and many companies are facing supply constraints (difficulties related to recruitment and supplies, rising costs, competition), especially in certain sectors (automotive, construction, tourism).
French companies are not so indebted after all
Corporate financial debt has risen sharply since the start of the crisis but has been used to drive investment: “loans have replaced demand deposits” for a majority of companies.
Despite strong demand for state-guaranteed loans (SGL) but a low utilization rate, companies continue to display caution in how they choose to amortize these facilities. The change in net corporate indebtedness seems to be a concern for 6 to 7% of business organization in terms of their Banque de France rating.
There has been very little recourse to equity financing and the use of this solution could be limited to a minority of companies.
Forecasts for bank debt and investments
After an exceptional increase in 2020 (+€138bn, including €124bn in SGLs), corporate bank debt is expected to grow only very moderately in 2021 (+€9bn) before accelerating slightly in 2022 (+€25bn), with demand for new loans partially offset by the repayment of SGLs beginning in April 2021.
Indeed, the forecasts for corporate debt and investment are strongly linked to SGL repayment schedules, which have consequently been given specific treatment in our forecasts.
The underlying change in investment loans (excluding loan repayment moratoria) is expected to amount to +€27 billion in 2021 and +€32 billion in 2022.
The underlying change in short-term credit facilities (excluding SGLs and moratoria) is expected to stand at approximately +€10 billion in 2021 and +€19 billion in 2022.