How the UK is and isn't France
We don't like to admit it but we're not that different
Having neither knowledge of French politics beyond what I read in the news, nor any great insights into the French psyche, I’m not going to comment on the election results or what that means for the future of Europe or how the UK has suddenly emerged as a beacon of stability. But all this talk of France did remind me of a longstanding annoyance of mine in which the UK economy is benchmarked against the US, when in practice THE UK IS FRANCE, just with the English language. Both are “former colonial empires with an old superiority complex” and with similar populations and similar sized economies. So as a bit of fun (!?) I thought I’d set out how the two countries stack up. They’re a lot closer than we often like to think.
GDP and growth
With all the caveats around how to measure GDP and what measure to use, it’s reasonable to conclude that the UK and French economies are pretty much the same size; not too surprising given both are rich, developed countries with almost the same population. Using current US$ figures the UK wins out on GDP per capita, but using PPP, France edges ahead. In short there’s little between the countries in terms of size and wealth (and if, like me, you’re constantly getting confused on what PPP actually is, I found this a helpful reminder).
The bigger story over the last 15 years is less about France vs the UK, and more Europe vs the US. Since the financial crisis, GDP per capita in $ has barely budged in France and the UK, while in the US it has climbed in line with historic trends. France had the euro crisis, Britain had Brexit. Different crises, similar outcomes. And if you want a chart to explain the obsession of the new UK government with growth, or wider angst and political instability across Europe, below is a good place to start.
The figures in the above chart are heavily influenced by changes in exchange rates, and on a PPP basis, the divergence between the US, and France and the UK, looks less extreme. But I tend to think current exchange rates, rather than theoretical ones, matter. I sure felt wealthier as a UK citizen in the US in 2007 when it was two dollars to the pound. Also, if you adjust the PPP figures for inflation, greater divergence returns.
Productivity
But returning to the UK and France, we like to think in the UK that the French take loads of holidays, including the whole of August off, while in the UK we work harder, although not as hard as the Americans, who work too hard, because after all, who really cares about work on their death bed.
There’s some truth to this, but it’s more about the Americans than the French. On average, a French worker in 2023 worked 1,500 hours, equivalent to 28.8 hours a week; a Brit worked 1,524 hours, equivalent to 29.3 hours a week; and an American put in 1,799 hours, equivalent to 34.6 hours a week. 24 hours extra work in the UK vs France per year, equivalent to 3 days less holiday. Hardly a seismic gap.
As well as showing how this pattern has been consistent over time, the chart below highlights the similarity between the UK and France’s policy response during Covid, with hours worked cratering as lockdowns shutdown the economy, while the US took a different path.
Although the difference in hours worked between the UK and France seems quite small, when paired with similar levels of output, it’s enough to drive a gap in productivity. Using PPP measures, France has slightly higher GDP and works slightly fewer hours, which means higher GDP per hour worked. French labour productivity isn’t too far off US levels, with the gap between the UK and France widening over time (something that’s not gone down so well in the UK).
Components of GDP
If the UK and French economies are similar in size and output, they must surely differ in where that output comes from? France is after all notorious for having a large public sector, with some of the highest taxes in the world and an interventionist approach to firms of vital strategic importance, like yoghurt producers.
Again, there’s some truth here, but the difference in output is less about how much the government spends and more about how much the countries invest. As a share of GDP, French household consumption is over 8 ppt lower than the UK, but investment is 7.5 ppt higher. The UK’s chronic under-investment has been cited as one of the main reasons for its lower productivity versus France, Germany and the US.
Sectors
At a sector level we often think that France is more agricultural and more industrial than the UK, but both economies are dominated by services, which accounted for 69.2% of GDP in France and 72.8% of GDP in the UK in 2023. Agriculture is tiny – 1.9% of GDP in France, 0.7% in the UK – and manufacturing has been falling, from c.15% of GDP in 2000 to c.10% of GDP today in both countries.
Granted, the two countries have met this fall in manufacturing in different ways. UK governments have largely shrugged their shoulders at the long-term trend, while in 2021, the French government set a goal of (re)growing the manufacturing sector to 15% of GDP. Macron has also been among the most hyperactive of European leaders in expressing concern over the impact of US industrial subsidies (e.g., Inflation Reduction Act) on European industry, although his outrage clearly didn’t translate into domestic popularity.
Companies
Stepping down a level there’s not much difference in the number of large companies that both countries have. The UK has historically had a larger listed market, reflecting London’s appeal as a listing venue for companies outside the UK, but in global rankings by market cap, the UK and France have similar numbers, both punching slightly above their share of global GDP (c.2% each).
Who those companies are is a mix of pharmaceuticals, industrials and energy firms, with France leading on luxury, and the UK leading on financials and data providers. Both have measly tech sectors with no mega cap names. AMR is the UK’s homegrown tech star, although it’s far from the magnificent seven, and SAP is, well, German, but so too is Linde, and as both were in the rankings I kept them in for consistency.
What does this all mean?
I could keep going. Unemployment is higher in France. Population growth and net migration have been higher in the UK. Foreign direct investment has recently been higher in France. Internet usage is higher in the UK. Go crazy in the stock of OECD and World Bank data if you wish.
But if you want to read more into this, besides just being a slight aside sparked by two elections, I think there’s something around how our perceptions of different countries aren’t always the reality, and something about the extent to which politics (and policies) really matter to economies.
On the one hand you can argue that the UK and French economies look very similar, despite differing political twists and turns over the last decade (or three hundred years). On the other hand, you can say that both countries have arrived at the same place but in slightly different ways. And to increase economic growth going forwards, the UK could invest more, like the French, and the French could work more, and for longer, like the Americans, or let in more migrants, like the UK over the last decade.
The difference now is that there’s a government in the UK that wants to invest more, and there’s a government in France that has failed to convince people to work more (e.g., Macron’s reforms to the pension age were one factor in the left’s electoral success). That’s one reason why I’m more optimistic on the UK.