Romuald Ribault did not intend to be a statistic at the tender age of 35. Yet last March the slim, soft-spoken entrepreneur was forced to shut the doors of his small IT company for the last time, becoming one of the thousands of small businesses that collapsed in a record month for corporate failures in France.
“It was very hard. We were very close, very young. We started with nothing and we created a brand. We were all proud of that,” he says, as he recalls the moment he and his business partner had to tell their eight employees that they were to lose their jobs.
The tragedy is that Mr Ribault, whose company supplied some of the biggest names in consumer electronics, had every chance of succeeding had he been able to hold on a bit longer.
In recent months many small French companies have begun to feel the first shivers of recovery, leading to a sharp slowdown in the rate of company failures. From a rise of 34 per cent in March – and 76 per cent for small businesses – the increase in corporate failures is now about 15 per cent, according to Altares, the corporate information specialist.
“The situation began to recover in the spring of 2009,” says Thierry Millon, director of research at Altares. “It was particularly encouraging in July, when the rise was very weak.”
Small business owners across France agree the wind is changing. “We may still be living day to day but we feel something is happening,” says Laurent Lairy, founder of Protect’Homs, a supplier of protective clothing.
But the recovery is still fragile and in France’s hardest hit sectors, such as automotive and aerospace, have yet to see any concrete improvement. “At least since June it has not been getting worse,” says Yvon Jacob, head of the GFI industrial federation. “We hope we have reached bottom but we do not yet have obvious signs of recovery.”
Life has been tough for France’s business sector, already burdened by some of the heaviest social charges in Europe. In total this year some 64,000 of France’s 5m businesses and small traders are expected to shut up shop.
But the reality is that it could have been much worse. For example, the rate of increase in UK corporate failures during the second quarter was more than twice that in France.
In fact one of the biggest weaknesses of France’s economy – a small and mid-sized business sector that fails to export – may well have been the cushion that helped many more to survive. A dependence on local markets in a country where consumer spending has proved resilient has turned out to be an advantage.
“The fact that France does not export as much as other countries protected small companies,” says Bruno Lucas, who runs a mid-sized building company in western France. For him, staying local is a guarantee of security. “People still want to redecorate their flat and they won’t go abroad to get that done.”
Stephan Brousse, who owns a Marseilles-based company supplying fruit conserves to patisseries, also argues that the very small structure of France’s SMEs may have made these companies more philosophical about tumbling profits. “In France we often accept that a company does not make a profit, because the owner is actually an employee,” he says.
That said, France’s small companies, like those in other countries, faced a severe liquidity crisis as banks began shutting off credit late last year.
But small business owners say the government’s rapid action in appointing a mediator in January to resolve credit issues with banks made a real difference. It “created an electro shock”, says Mr Lairy, who sits on the mediation committee of Mayenne. Of the 80 companies who faced collapse owing to lack of credit in his department, 66 were saved through mediation.
Other government initiatives gave extra support at just the right time. For example, a law drafted last year and introduced in January that strictly curtailed payment delays to suppliers – but deeply annoyed annoyedsome of France’s biggest companies – proved to be a vital source of liquidity for thousands of small businesses.
“The state has been extremely reactive,” says Mr Lairy. “The solidarity between the public and private sector in this crisis is unprecedented. If we are getting out of this crisis relatively quickly, it is because of that solidarity.”
For Mr Ribault it all came a bit too late. But he is not bitter. Today he works for Ecologic – another start-up – a non-profit company collecting and recycling consumer products for manufacturers. His entrepreneurial ambitions are satisfied by the prospect of building a business in the emerging environmental market.
“I really enjoy what I am doing today and I feel that it is worthwhile,” he says. “So you see, some good has come out of the bad.”