Does Macron herald a new era of self-employment?

Does Macron herald a new era of self-employment?

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You need a certain amount of confidence to create a political party named after yourself and lead it to the Élysée Palace. And Emanuel Macron is continuing to raise Gallic eyebrows with his pledge to make France a ‘start-up nation’.

Better known for producing large global firms operating in traditional industries, such as BNP Paribas, Carrefour, AXA and Total, France has historically not been especially freelancer-friendly, with higher tax rates and complicated processes for starting and operating companies.

But Macron is looking to change all that – incentivising entrepreneurs as part of a broader effort to reform France’s sclerotic economy.

As part of a wholesale reform of the French labour market, he wants to cut Corporation Tax from 33 per cent to 25 per cent. Plans are also afoot to address the discrepancy in maternity leave between employees and the self-employed, simplify payroll taxes for small businesses and double the threshold to allow more microbusinesses to benefit from tax breaks. The Prime Minister Edouard Philippe announced that these reforms will be in place by December 2019.

Self-employment currently only accounts for 11 per cent of the French labour market, well below the UK and EU average. This shift in the French government’s approach will have a positive effect in the long run, encouraging more people to start businesses and pursue self-employment as a simpler and viable career option. It will take time though for this to take effect, as well as a strong political commitment to backing this significant change in mindset.

Over on this side of the Channel, there are serious question marks over the government’s commitment to the self-employed and a flexible labour market.

While France is looking to make it easier to establish and operate as a self-employed business, our Conservative government is making life far more difficult with punishing changes to the IR35 tax rules.

While France is looking to lower its corporate tax rates to encourage entrepreneurship, our Conservative government is trying to raise the rate of National Insurance for our smallest businesses and also increase the number of businesses forced to pay VAT.

On its own, this would be very concerning news for the UK. What makes it all the more worrying is the ‘B’ word: we will be leaving the European Union in six months in what we all know will be a turbulent period. Macron’s startup nation is all part of a ‘battle for business’ whereby France and other EU countries will try to attract mobile international businesses to move operations out of the UK and into their countries.

This matters particularly for the UK’s 4.8 million self-employed. This is because many work in sectors that rely heavily on access to the EU’s single market, such as financial services. Concerns do seem to be growing – IPSE’s latest Freelancer Confidence Index shows that Brexit is now the top concern for people working independently, over and above IR35 and other government policy.

This could well be because the self-employed tend to be the ‘canary in the coalmine’: they will be the first to lose out if companies decide to hold back on investment or move operations out of the UK.

Theresa May’s hostile turn towards the self-employed is therefore spectacularly badly timed. While Macron is courting companies to set up shop in France, May is making it more and more difficult for them to access the on-demand specialist expertise they so desperately need.

Changes to IR35, making it more onerous for private sector organisations to engage independent professionals, could well be the straw that broke the camel’s back for many companies who are looking for an edge over their rivals.

While Macronism may yet founder against entrenched interests in France (and scandals such as Alexandre Benalla will not help), the contrast with the UK’s direction of travel is concerning.

The UK simply cannot afford to give away its unique competitive advantage in these turbulent times – our world-beating flexible labour market.

By Jordan Marshall

Politics