France Infrastructure Report Q2 2008

France is one of the most visited countries in the world, with almost 75mn tourists each year. In terms of income derived from foreign tourism, France is ranked third. The country's economy is one of the strongest, both in Europe as well as in the world. France is also home to some of the world's leading players in the construction industry, which grew at a rate of 4.1% year-on-year (y-o-y) in 2006. This report forecasts that the industry will grow at an average of 2.75% during 2008-12.

French construction companies have developed a very high reputation on the international market, as is evident from the large number of international contracts they have won in the past few years. A diversified outlay of investments - roads, railways, airports and power plants - has enabled almost all the segments of French infrastructure to grow. However, it is property construction - residential and commercial - that is witnessing an uptrend after a brief slowdown, and catalysing industry growth.

In the transport and utilities sector as well, French companies are among the market leaders in Europe and worldwide. The rapid development of emerging markets infrastructure sectors has resulted in several lucrative contracts for French transport and utilities companies abroad. The French and European markets are also presenting considerable opportunities in both utilities and transport. In the utilities sector, nuclear power is making a cautious comeback throughout the continent, and the French firms are among the few worldwide who have pioneered the technology. The other industry that France holds a comparative advantage, the high-speed rail, is also showing very strong growth in Europe, as new high speed lines are laid, new routes established and passenger traffic increasing as a result. In most of these projects, French companies have got the lion's share of deals due to their expertise in their respective industries.

The French construction industry is highly fragmented, with around 250,000 active contractors, with a high proportion being small- to medium-sized firms operating across relatively small geographical areas.

However, the industry is best known for its large and acquisitive international construction groups. The top-four contractors in the nation are VINCI, Bouygues, Eiffage and Amec SPIE.

The French infrastructure sector, however, is plagued by a few problems. The sector is governed by stringent regulations, which act as a barrier to growth by discouraging entry of new players into the market. The tax rates in the country remain one of the highest in Europe. In addition, the budgetary deficit and unemployment levels are some of the other macroeconomic factors that could impede the industry's growth.

The construction industry in France is expected to grow at a modest pace. It is forecast to reach a value of EUR284.73bn (US$477.3bn) in 2012.