France: yellow vests, what consequences for companies?

The yellow vest movement , which started spontaneously in mid-November as a reaction to the increase in fuel taxes, has spread via social networks, rapidly catalysing the discontent with the government , while expressing a wide range of demands regarding taxes, social issues (reintroduction of the solidarity tax on wealth, increased purchasing power, etc.) and political issues (improvement in representative democracy, elimination of the Senate, etc.). It started as a citizens’ movement while claiming to be independent from all parties and unions, and led road blockades and occupation of road infrastructure in rural and peri-urban areas . The movement also led to demonstrations in city centres each Saturday since 17 November, which were rapidly accompanied by violence. There have been now 11 consecutive Saturdays with demonstrations, disrupting among other things the business and activities . Companies have been faced with various degrees of material damage, procurement problems and a drop in footfall linked to blockades. The yellow vest movement, which has been negative for companies in the short term, could on the other hand be more positive for them in the longer term. By injecting more than €11 billion in favour of low-income households, which have the highest propensity to consume, the government has opted for a mainly deficit - financed , significant stimulation of consumption, which should increase demand directed at companies in 2019. This is welcome support, especially as companies have to cope with a less buoyant international environment, marked by trade tensions between China and the United States, emerging countries’ problems, the growing uncertainty surrounding Brexit, and the economic slowdown underway in the euro zone. This Special Report looks at the costs and benefits of the yellow vest movement for companies at different time horizons.