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In the run-up to Christmas, businesses take a hit from ‘Yellow Vest’ protests

Stephane Mahe, Reuters | A vandalized wine shop is seen the morning after clashes with protesters wearing yellow vests, a symbol of a French drivers' protest against higher diesel fuel taxes, in Paris, France, December 2, 2018.

The ‘Yellow Vest’ protest movement in France has hit businesses hard. In the crucial shopping weeks leading up to Christmas, retailers have been told to close up shop, petrol stations have run dry and tourists have been avoiding the capital.

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What a difference a few weeks makes. In October, France’s national institute for statistics INSEE reported growth of 0.4 percent GDP in the third quarter of 2018. Household spending rose slightly too, along with a significant hike in goods consumption. Exports recovered after a dip, and after France’s transport strikes earlier in the year, transport expenses had bounced back. The finance ministry was looking forward to a fourth-quarter boost, driven by rising consumer spending. In short, things were looking up.

But that was before violent anti-government protests erupted throughout the country. The "Yellow Vest" movement has had a “severe and ongoing” impact on businesses, according to French Finance Minister Bruno Le Maire.

Le Maire met with industry groups and business federations on December 3 to discuss the damage after a third Saturday of clashes. He said that small retailers had seen a fall in revenue of between 20 and 30 percent while visitors were staying away.

Crucial holiday shopping season

France’s holiday shopping season started poorly, with brick-and-mortar retailers already struggling to compete with online behemoths like Amazon and France’s CDiscount. Now, with shop windows smashed or vandalised, unrest in the streets and tourists giving a wide berth, foot traffic has further declined, leading to billions of euros in lost revenue.

The Fédération du Commerce et de la Distribution (FCD) reported a “very significant drop in activity for all businesses” after the third weekend of blockages, according to AFP.

“It has a particularly heavy impact on customers who want to do their shopping before the holidays, for suppliers who can no longer deliver, for employees unable to get to work and for shops, which have reported huge losses,” the FCD said in a statement.

>> Visiting Paris? Yellow Vests could wreak havoc on your plans

The damage was felt across all sectors: French oil giant Total said that 75 out of 2,200 petrol stations across the country had run out of fuel because they weren’t able to receive supplies due to road blockages. Hotel industry group UMIH said that reservations were down 10 to 15 percent.

Restaurants have seen earnings slump by between 20 and 50 percent, depending on their location. And with supply chains disrupted, the food processing industry is expecting to see “catastrophic” and “irretrievable” losses of up to €13.5 billion, according to food industry group ANIA.

Hotel consulting group MKG published a report on the effect the protests were having on the tourism industry. It reported that between November 28 and December 3, 35,000 overnight stays in Paris were cancelled, representing a haemorrhage of €10 million for the hotel sector just in the capital.

Widening budget gap

And it’s not over yet. Prime Minister Édouard Philippe cancelled the proposed fuel-tax hikes, but in doing so the government is left with a hefty gap in the budget of €4.53 billion.

French President Emmanuel Macron made it a campaign promise to balance France’s books and cut the budget deficit, and was previously aiming for a public deficit of 2.8 percent of GDP in 2019 after failing to hit last year's goal of 2.3 percent.

Now it would appear that the government has abandoned that objective, having to focus instead on plugging that budget gap   a gap that may end up growing as the government tries to placate public anger by offering up fiscal carrots.

Le Maire has suggested accelerating tax cuts for households and is pushing businesses to offer their employees tax-exempt bonuses of up to €1,000. French business daily Les Echos, citing unnamed sources, said the government may try to fill the void by postponing a planned increase in the minimum wage (already pushed back from January 2019 to October 2019) or by putting off the corporate tax easing planned for next year.

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