Economic transformations in the Paris Region

The Paris Region is a major globally competitive economic area boasting undeniable assets that enhance both its performance and its attractiveness. It nonetheless faces a number of challenges requiring profound economic transformations that the COVID-19 crisis has thrown into even sharper relief.

Aworld-class metropolitan area with a GDP of 726 billion euros in 20181, the Paris Region is the leading economic area in the European Union (5.4 % of GDP across the 27 EU countries). Its leadership position has strengthened since Brexit. This economic power, built on 1,380,000 businesses and 6.5 million jobs, relies on diversified activities with high added value in industry, commerce, tourism, services and agriculture. As this is a capital region, public administration plays an important part in decision-making, and the area boasts world-class facilities in a range of fields including culture, education, health care, defence and finance. The fact that the region has a population of 12 million is also an important asset in terms of the so-called “residential economy”: because of its size and, more importantly, the diverse needs of its population, the region is able to offer a wide range of services, some of them unique to the area.

A RANGE OF ASSETS FOR A DYNAMIC ECONOMY

The region’s R&D potential is one of its best known assets, with almost 20 billion euros invested by businesses and public actors annually, making this Europe’s leading region in terms of R&D spending. For a long time the Paris Region lagged behind other global regions, but over recent years it has significantly increased its support for innovation and created one of the most dynamic ecosystems in the world, boasting emblematic innovation hubs such as La Station F and the Paris Saclay campus and witnessing the emergence of unicorns representative of French Tech. The Paris Region is the world’s leading tourist area, and tourism (both for leisure and business) is an important economic growth lever. The Regional Economic Development, Innovation and Internationalisation Plan (SRDEII), completed in 2021 and titled “Stratégie #Leader”, focused on supporting a clear ambition: that of establishing the Region’s position as one of the world’s most attractive and competitive economic areas and mobilising efforts supporting growth, jobs and innovation. The region was thus able to accelerate both economic growth and job creation prior to the 2020 health crisis. Several global rankings also highlight the increased vitality of the region in terms of foreign investment, tourist footfall and innovation.

The diversity and energy of the Paris Region ecosystem are also rooted in physical and digital infrastructure ensuring the circulation of people, goods, capital and data, all of which are vital to the metropolitan economy. Several major public policies are in the process of reinforcing and transforming this infrastructure (the development of the Greater Paris transport network, the transformation of airports and major Parisian railway stations, the creation of new districts, policies in favour of very high bandwidth, etc.), thus making it easier for private actors to become involved in the creation of new economic hubs, cultural venues, tourist facilities and so on. Many challenges remain, however, especially as regards the quality of services provided by certain facilities, the reduction of carbon emissions, and the preservation of biodiversity and the living environment. Inequalities have also grown, both between local inhabitants and between different areas. This means that the Paris Region, which is often perceived as providing somewhat low quality of life, has become less attractive to certain wage earners who prefer to move elsewhere.

COVID-19, A SHOCK FOR THE ECONOMY

It was in this generally buoyant context—though with important issues that still needed to be addressed—that the world entered its first global crisis in peacetime. The suddenness of Covid-19 and the speed at which it spread across the world prompted governments to implement drastic measures to curb its propagation, including lockdowns. These decisions, though necessary for public health reasons, led to a sudden large-scale recession. In 2020, the employment curve in the Paris Region resembled a square root sign, with a little over 100,000 jobs disappearing despite all the steps taken to limit layoffs with support for businesses, furlough schemes and remote working. The persistence of the health crisis, the appearance of variants and the race to find a vaccine curbed the positive effects of recovery, especially in the Paris Region, because of the many restrictions to international travel. This was particularly true of tourism, which has been profoundly affected by the crisis. On the other hand, the region continued to attract direct international investments in 2020, running counter to the global trend, with 336 projects potentially leading to the creation of 10,800 jobs².

REALITIES OF THE REGIONAL ECONOMY HIGHLIGHTED BY COVID-19

The health crisis and its consequences reveal the strengths and limitations of the regional economic model.

An economy highly dependent on international flows

For twenty years, the Paris Region has engaged fully with the era of globalisation, which is characterised by the increased circulation of goods and people and the transformation of transit and visitor facilities such as international airports, stations and exhibition centres. An important facet of this is tourism, which accounts for 7% of regional GDP. The 50 million people who visited the region in 2019 generated 21.7 billion euros of economic benefits, and over 300,000 jobs were involved3. Restrictions to the circulation of people had a significant impact not only on the hospitality and transport sectors—which represent 80% of jobs in tourism—but also on the events sector, the cultural sector and the luxury goods industry. France lost more than 33 million tourists in 2020. Instead of returning to pre-crisis visitor numbers, focus should be on maximising benefits on the regional economy, especially where major events are concerned (Rugby World Cup in 2023, 2024 Olympics, etc.). The Paris region is thus a crossroads for the exchange of goods supported by one of the world’s densest consumer areas and major commercial and transit hubs (Charles de Gaulle Airport, the Rungis wholesale market, the Gennevilliers River Port, etc.). During lockdown, the logistics sector in the Paris Region has demonstrated its resilience and its ability to adapt to new requirements. However the significant development of intra-regional logistics flows, due in particular to the e-commerce boom, raises the question of how the logistics industry can find its place within densely populated areas. The health crisis implicitly demonstrated that the over-representation of international flows in the economic model, and above all the eagerness of certain economic operators to attract new flows instead of maximising the economic benefits of the ones that already exist, raise important questions. This is all the more true because climate-related challenges will have to be integrated into public policy, including economic policy.

SRDEII: THE REGIONAL ECONOMIC DEVELOPMENT, INNOVATION AND INTERNATIONALISATION PLAN 2022-2028

The so-called “NOTRe Act” focusing on the organisation of French Regions, passed on 7 August 2015, reinforced the responsibility and coordinating role of Regions in terms of economic development. By transposing article L4251- 13 of the Code Général des Collectivités Territoriales (CGCT), it allows French Regions to elaborate an SRDEII in the year following regional council elections. The SRDEII outlines orientations in terms of support for businesses, the social and solidarity economy, internationalisation, property investment and business innovation, as well as initiatives relating to the attractiveness of the Region. The development and deployment of this regional strategy, which will act as a roadmap for regional economic initiatives in 2022-2028, will involve all economic and institutional stakeholders and offer businesses the best possible support in order to boost their development and ensure that they are firmly rooted in the Paris Region.