He got their votes, but will President Sarkozy’s reforms be enough to tempt London’s expatriate French to return home?

Last weekend, the French gave their new leader a kick in the shins and then gave him a mandate to change France. His majority in Parliament is not as big as he had hoped – there was a panicky last-minute surge towards the Socialists – but is enough to ram through his tax and social reforms. Enough, if he can dissuade the unions and la racaille (Mr Sarkozy’s unpleasant label for stone-throwing unemployed youngsters) from taking to the streets in protest.

It would be too obvious to say that business will benefit from the Sarkozy reforms, but a more interesting question is what sort of business might thrive when the Sarkozites start to undermine the edifice of France’s socialist fortress.

France Invest, the inward investment agency, has big hopes that employment reforms will attract more multinational investment dollars into France. The new President, pro-American, a child of immigrants and Jewish from his mother’s side, presses more of the right buttons on Wall Street than did his predecessor, Jacques Chirac. Moreover, the reforms could be quite dramatic, if they succeed. Mr Sarkozy wants to destroy the 35-hour week, abolish wealth taxes and scrap legislation that gives privileged status to the “patriotic” trade unions.

The President wishes to shift the tax burden from income to consumption. A rise in VAT is on the cards and he wants to scrap the entrenched rights of five French labour unions. As a reward for their role in fighting the Nazis, the five enjoy a special status that guarantees their right to negotiate with an employer regardless of whether the union has any members among the workforce.

The President’s most populist proposal – tax-free pay for overtime – will kill off the 35-hour week, in time. Any employer with half a brain who resents les trente-cinq heures will shift the balance of pay into overtime, rewarding staff who stay the course with an abundance of tax-free cash.

So popular is this measure that France’s army of cadres, the middle-management class battered by redundancies and loss of status, has demanded a similar tax break. Meanwhile, the better-off will gain a fiscal shield that ensures that no one will pay more than half their earnings in tax, a measure that will kill France’s wealth tax, a tithe that has pushed French entrepreneurs offshore, many to Britain.

Mr Sarkozy wants them to come home because, in the end, his reform will succeed only if it stimulates business creation. The French like big organisations and run them well, but big firms don’t create jobs. The Sarkozy agenda ought to be good for small businesses, cutting the cost of employment and allowing owners to keep more of their earnings.

Even if the French expats do not return, Mr Sarkozy may get help from an unexpected quarter. An army of well-off Britons have invested in French real estate, second homes to which they flee for recreation. About 100,000 have chosen permanent residence. Many are self-employed or living off capital accumulated in Britain. They regard France as a great place to live, but, until now, a lousy place to run a business.

What if that were to change? Philippe Favre, head of France Invest, senses an amusing irony. “People always talk about the Franco-German alliance,” he says, “but it is the British, not the Germans, who come to live in France.”

Firms brush over the past

It’s almost embarrassing. Two titans of the European chemical industry are flirting with merger, a deal that would reforge ICI’s historic link with Nobel Industries, a history that goes back to the early 19th century, when Europe was building the first chlorine and aniline dye makers.

What are ICI and Akzo Nobel arguing about? Pots of paint. ICI sold off its ethylene crackers and chlorine plants many years ago. It flirted with fragrances and flavours, but made a mess of it. Now it makes starch and paint. No fancy chemistry here, just mixing pigments and resins in a big vat.

Akzo has also shed its history and if there is still large-scale chemical manufacturing in Europe it is thanks to private entrepreneurs, such as Jim Ratcliffe, founder of Ineos, which bought BP’s chemical business. Only BASF has held on to its heritage, pursuing a strategy of integrating chemicals from feedstocks to plastics and stubbornly refusing to abandon bulk chemicals.

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