The impact of world events on my investments

With the political and economic changes in Europe and the imminent departure of the UK from the European Union, you might think Europe was a place to avoid when thinking about your investments. However, these kind of broad brush critiques sometimes miss some of the other economic stories.

Globally renowned fund manager, Schroders has recently spotlighted an interesting development going on just across the channel from the UK.

Schroders tracks a whole range of factors when compiling the Schroders Global Cities index. Strong tourism and improving transport links are among the essential ingredients for improving a city’s prospects. Paris, ranked 16th in the index, is worth a look with its fortunes improving on both aspects.

Tourism recovers after terror attacks

The Paris region registered 16.4m arrivals in the first half of 2017. That was the most in any first half of the year since records began in 2008, confirming a strong recovery from a lull in tourism that followed terror attacks in November 2015.

Following strong summer bookings, the region could see 32-34m tourist arrivals this year compared with 30m in 2016. Tourism generates over 7% of France’s national income. While in the Ile de France region, which includes Paris, around half a million people have jobs linked to tourism.

Macron’s reforms aimed at unlocking spending potential

For some time, France has had a reputation for having too much red tape, slowing down growth. However, recently appointed French President Emmanuel Macron is trying to promote a more business friendly image of France.

For example, the recently approved Loi Macron, sweeping reforms designed to “unlock the French economy”, has led to more flexible opening times for retailers.

This has benefited tourist designated areas such as large parts of central Paris. The city’s grands magasins such as Galeries Lafayette and Printemps are now open to Sunday shoppers and can cater to the many tourists and will help grow the €20bn annual tourist spend in the region.

Grand Paris Plan

The French capital is set to benefit from a massive infrastructure spending programme. The plans include the development of a fully automated metro line encircling Paris called the Grand Paris Express and an extension to the metro to reach Paris CDG airport.

In addition to the public transit Grand Paris plan (€26bn over 15yrs to develop over 200km of transport network), the 2024 Olympic Games are estimated to require an additional €6.6bn in spending, of which €3.2bn will be spent on upgrading existing infrastructure. A study commissioned by the city estimated the games could generate up to €10.7bn for the region and 247,000 jobs.

The Brexit effect

Brexit may be an opportunity for Paris to attract London based financial services and support its fast-growing fintech sector, which is still in its infancy. The government has pledged to reduce the cost of employing financial services staff in France and also committed to keeping the regulatory burden on finance companies competitive.

In addition, it has committed to cutting France’s corporate tax rate to 25% from 33% over time and aims to overhaul its labour rules.

These changes will benefit visitors to the French capital as well as the residents of the Paris region. Schroders also believes that the fact that Paris is now “open to business” will benefit the commercial property market, improving Paris’ attractiveness to property investors. Paris certainly looks like it is on the up.

Adrian Emery – CEO FPI

Message from the CEO – Jan 2018

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