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France and the UK have a long shared history their economies have similar levels of living standards ranking 23rd and 24th in global GDP per capita yet there are also big differences on their attitude to work pensions and housing not many people know this but since 2000 France has been one of the worst performing economies in the oacd the UK performed a bit better mainly because of high growth in the early 2000s however is GDP a good measure to compare living standards the French economic model is intriguingly different with a greater value placed on Leisure and retirement who cares about GDP if you can sit in a nice French cafe the past 5 years have been particularly tumultuous for the UK it has seen a succession of Crisis both external and also self-inflicted but whilst the UK can now look forward to a new government with a large majority France faces a period of Economic and political volatility which has caus some commentators to ruy whether France could have its own Liz trust moment let's compare the two economies well if there is one thing that voters really dislike it's a period of high inflation and falling real wages and both countries have experienced inflation in the past two years though interestingly in France the inflation rate was significantly lower this was primarily because the French government spent much more on reducing Energy prices higher energy cap in France Energy prices were capped at 4% in 2022 and 15% rise in 2023 by comparison in the UK in this period Prices rose over 110% now the result was that a much bigger increase in the French budget deficit because of the cost more of this later ironically France could have even lower inflation but for bad luck more than any other country in the world France has embraced nuclear power they have one of the highest shares of energy generated from nuclear at 65% by contrast for UK is just 13% and efforts to build a new nuclear power station in the UK meet with the UK's traditional difficulties in building but anyway a large nuclear ship was ideally suited to the 2022 energy crisis but as look would have it France's nuclear power stations were undergoing maintenance and output was curtailed it was a time for nuclear to shine but unfortunately it didn't now both countries have seen a similar rise in government debt and this reflects three shared Trends firstly both countries have had lower economic growth leading to lower tax revenues secondly both countries have seen a big rise in demand and for healthare pensions and Welfare spending and thirdly both have recently experienced external shocks however there are differences firstly France is much more generous in paying pensions 133% of French GDP goes on pensions compared to just 5% in the UK recently the UK planned to raise its retirement age to 68 met with very little protest but in France this a much bigger issue and the decision of macron to raise the age from 62 to 64 was very unpopular 80% opposing it and both the popular front and National rally have pledges to reduce the retirement age to some extent and with all the other tax cuts and spending pledges economists are red the French deficit could get even bigger the French deficit has been increasing in the past 10 years but if the current spending pledges and tax cuts are implemented then it could Pride over even bigger budget deficit and the problem France will have is that the EU has already warned France about the size of its deficit don't forget it's in the Euro so it doesn't have the same monetary Independence and this could lead it to a standoff more Mis later but in recent years French bond yields have definitely increased and more unfunded tax cuts and spending pledges risk what is now known as a Liz trust moment in 2022 the UK had about 100 billion of unfunded tax cuts and this led to Rising bond yields falling currency and after 44 days of fall of the Prime Minister could this happen in France with a political deadlock and combined the budget deficit could this happen and certainly it is a ruy for our bond markets already there are signs of investors actually looking at the UK and thinking well that looks more stable than France's current situation so the outlook for France is of concern a combination of a big rise budget deficit low economic growth long-term demographic uh pressures of an aging population or risk people finding French bonds less attractive however a list trust moment is still perhaps unlikely firstly pledges usually get watered down wanting government secondly the UK crisis was as much about tax cuts during 10% inflation inflation in France is much lower nevertheless while fears of government debt often get exaggerated I think it is a concern that France seeing this quite significant rise in debt at a period of low economic growth and demographic pressures 2023 was the lowest birth rate since 1945 pension spending is going to be rising but that isn't an investment in the economy if people spend more time in retirement that's not going to help economic growth like if you say invested in renewable energy or something like that another big difference between the two econ economies is a tax burden now in the UK the tax burden has increased in the past decade from 32 to 37% of GDP and it could rise more in the coming years but it's still a long way behind France which at 45% of GDP is the second highest in the world France has 2.3 million civil servants a lot of spending on Health Care education uh pensions and increasingly State intervention in the industrial policy that is having some benefits like new battery factories in the northe east of France but at 45% of GDP there is a r that further tax Rises on the rich or even just ordinary people could create disincentives uh to work like the French super tax of 2012 certainly did another big difference between the two economies is on Industrial relations in the past two decades France has lost nearly 10 times as many days to Industrial action as the UK and they say that the French preference for protest and Revolt goes back all the way to the early revolutionary days of the first French Republic and five republics since show the willingness and ability of France to reinvent itself whereas in ukv at least until recently a more Trend to a gradual Evolution but even on Industrial policy the UK starting to catch up with France in two years of 2020 to 22 uh UK actually lost more days to St strikes than France so a a degree of convergence on unhappy workers one relative success of the French economy has been in building houses it's one of the highest rates of Home Building in Europe and it's rewarded with only 10% of French households Having excess housing costs compared to 23% in the UK UK is a real housing crisis with rent and house prices being very unaffordable France is Al been much more successful in building infrastructure such as High-Speed Rail the contrast between the two countries is quite Stark UK struggling to build 50 miles of hs2 France built Big connections to all its major cities Now France does have a an advantage in that it has a similar population to the UK but a much bigger geographical size so there's a lower population density there not quite the same nimbyism in France but also planning regul are different and there is a presumption in favor of following government projects without inevitable delays and problems that you get in the UK another big contrast between the two economies is on the Euro and the European Union France is a Founder member of both the EU and the Euro and it means that on monetary policy France has less Independence it is operated by the ECB not necessarily in French's interest and there may be this increasing tension with France's borrowing going up and the ECB wanting to play a role of a policeman saying he can't borrow that amount the UK of course has never adopted the Euro and of course recently left the European Union left a single Market left the Customs Union and we see more checks between a trade between UK and France than ever before but one interesting outcome of brexit is that it revers to growing euroskepticism on the continent from France in particular now the French may be one of the most pessimistic countries in Europe at least this reports as it is but there is a certain shout and fraud in France that brexit was a bit of a self-inflicted wound but the important thing is that uh it really made the idea fit unpopular so even though the far right doing quite well they kind of quietly dropped their fit policy this video on my new Global Channel goes into more detail on why brexit was ironically rather helpful to the European Union