French voters are set to decide on their new leader in the coming days, as incumbent President Emmanuel Macron faces off against far-right candidate Marine Le Pen.
During his tenure as president, Macron has been an advocate of the private markets, pushing ahead with labor and tax reforms, as well as new funds to foster innovation. Last year, VC investors poured a record €10.7 billion (about $11.6 billion) into French startups, according to PitchBook data. While Macron has been leading in the opinion polls, the millions of undecided voters could sway the vote in favor of Le Pen.
A victory for either party will have broad implications for France’s VC and PE markets. Here are the key takeaways from the candidates’ 2022 campaign pledges and what each outcome could mean for private market investors.
Immigration
Access to talent is a priority for many startups that often have to compete with tech giants like Amazon and Google for highly-skilled tech workers, many of whom come from abroad.
This could be harder under Le Pen, who has pledged to take a tougher stance on immigration. If she wins, Le Pen plans to call a referendum proposing tougher criteria for who enters and receives the French nationality, and she would give French citizens priority for access to jobs, benefits and housing.
Many countries have been seeking ways to make transfers to tech roles easier. Last year, the UK announced a “scale-up” visa to attract highly skilled workers, while Macron himself launched the “French Tech Visa” program, a fast-track four-year residence permit for entrepreneurs and their families, when he was elected in 2017.
However, Macron has also said that control of European and national borders needs to be reinforced and that reforms are required to make deportation more efficient.
Pensions
During his first five years in office, Macron proposed reforms to the French retirement system that were met with widespread protests. Despite this, he is looking to progressively raise France’s retirement age from 62 to 65.
For her part, Le Pen plans to keep the retirement age the same and change it to 60 for those who have been working for 40 consecutive years.
By bumping up the retirement age, pension funds could potentially have a bigger pot for investment, part of which would be earmarked for PE investments. Conversely, keeping the retirement age as is could put pressure on funds to increase distributions among a growing demographic of pensioners.
French pension funds have historically shied away from investing in private equity, but the asset class has become more attractive in the past few years—which could lead to larger allocations.
Some funds are already making a move. In 2020, France’s largest pension reserve fund, Fonds de Reserve pour les Retraites, set out to almost double its PE assets to as much as 5% of its total over three to five years.
Tax
Both candidates are broadly in favor of lower taxes. When Macron formally launched his campaign for re-election, it was on the promise of more tax cuts. Macron’s administration has already reduced the corporate tax rate in increments, from 33% in 2017 to 25% this year. He had also extended the country’s research tax credit and made it easier for foreign companies to start operations in France. If he wins a second mandate, he plans to further reform the tax code to encourage investment.
Le Pen has pledged several tax cuts, with most aimed at cutting the cost of living for ordinary citizens. This means cutting value-added tax on fuel and other essential items and abolishing income tax on those under 30. She also proposes a corporate tax exemption for entrepreneurs under 30. She wants to encourage businesses to raise wages by 10% by making the increase free of employer tax contributions.
At the same time, there are plans to better enforce taxation. Macron has helped champion efforts to ensure US tech companies are properly taxed in the European Union. This is one area where the two have common ground. Le Pen has also proposed an expanded digital-services tax on American tech giants in France.
Sovereign wealth fund
As part of her plan to boost the economy, Le Pen wants to set up a new sovereign wealth fund into which citizens would be able to put their savings.
It would be used to invest in the French economy—for example, to nationalize the country’s motorways—and make strategic investments abroad that would benefit the nation. French publication L’Opinion reported the fund would be worth €500 billion.
Some VC- and PE-backed companies will likely benefit from the fund because a portion is allocated to investing in tech innovation and research.
France does already have a sovereign wealth fund, Bpifrance, which offers loans and invests in startups, SMEs and mid-caps both through direct investment and fund-of-fund activity. It has been a key part of Macron’s €34 billion “France 2030" investment plan, which is aimed at fostering industrial projects and innovation.
Featured image via TomasSereda/Getty Images
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