VSE and SME bosses are not very confident about the economic outlook for 2024

The public investment bank, Bpifrance, surveyed business leaders to find out how they approach this new year and their morale is not high.

Some 5,000 very small businesses (VSEs) and small and medium-sized businesses (SMEs) were surveyed in November and December 2023. The Bpifrance indicator, published on January 16, lost a few points over a year and moved away from the trend long-term which was rather positive, the year 2023 seems to mark a turning point.

Almost all of them cite the lasting consequences of the war in Ukraine. The effects are always felt almost two years after the start of the conflict. Added to this is the situation in the Middle East and the extension of the conflict in the Red Sea where commercial ships are being targeted by Yemen rebels protesting against the Israeli offensive in Gaza. Too many uncertainties remain for companies that want to export, the horizon remains in the fog, hence the growing fears of business leaders in terms of cash flow.

Transport and construction remain the two areas most affected by the drop in order books. Elsewhere, the situation is stabilizing but remains fragile, hence the possible slowdown in hiring, which is bad timing for the government which intends to achieve full employment in 2027. The ambition of the State and policies is one thing, the possibility of economic actors to achieve it is another.

Lack of confidence impacts investments

The authors of the Bpifrance study reject the hypothesis of a halt to growth. But the fears of VSE and SME bosses about a cooling of the French economy in 2024 are weighing on investment prospects. The pattern is classic, in times of doubt, a responsible boss will avoid getting involved. In uncertainty, he will invest less, to avoid having difficulty repaying his loans.

And despite the reassuring speeches of the monetary authorities, business leaders do not see interest rates falling, credit remains expensive. This is called trust, the basis in economics and in the mind of a responsible decision-maker. Without confidence, no unnecessary risk-taking and therefore no or less investment, while waiting for better prospects.