Page last updated at 23:26 GMT, Wednesday, 4 June 2008 00:26 UK

French businesses rue red tape

By Alasdair Sandford
BBC News, Paris

Before last year's French presidential election, Slimane Bensala and Ouissam Mazhoud, young businessmen from a troubled neighbourhood of Mantes-la-Jolie, an hour from Paris, were just getting started in the fashion industry.

Slimane Bensala and Ouissam Mazhoud
The men behind the Benmaz fashion brand are building their business

They drove around France promoting their Benmaz brand and offered T-shirts to visiting stars such as Will Smith.

But they were frustrated by bureaucracy, high costs, and thought people looked down on their North African origins.

In 2007 they talked openly of escaping across the Channel to set up business in the UK. "In France, everything is hard, the administration, the banks. It's very hard to start a business here," said Slimane at the time. "In England it's easy."

French companies often complain of being burdened with expensive red tape, imposed by an administration that is anything but business-friendly.

A government bill to "modernise the economy" now before parliament is designed in part to sweep away restrictions and encourage a more entrepreneurial society.

More than 12 months on, the entrepreneurs are still operating from France. In the shadow of the Grande Arche de La Defense in the heart of the Parisian business district, where they are preparing to meet a potential client, they talk of their success.

It's very difficult being an entrepreneur, you are all alone with your idea and your project
Slimane Bensala

Benmaz has a contract to supply Galaries Lafayette, its products have been displayed at a "pret-a-porter" fashion show, and the business is expanding.

But the problems with bureaucracy have continued. One bank agreed to open an account, but the manager returned the cheque a week later.

"Maybe he was afraid of us, or of creators and fashion," says Ouissam. "But I think it is just an excuse - they don't want to take risks."

Lengthy delays

Scooters are essential to "Welldone!", the business run by Thomas Coutheillas. He sends his agents around Paris to look after apartments belonging to mostly rich clients from countries like America and Britain.

The firm supervises repairs and provides services, such as cleaners, nannies and taxis. But Thomas has also had his problems with French bureaucracy.

From his rented office in central Paris, he recounts how when he tried to hire new staff recently, the authorities made a mistake - and registered them under his name rather than the company's.

"I would have been considered as the employer, and that wasn't possible," he says.

"If there was a problem, the employee would have acted against me.

"I tried to call the authorities and for hours, days, weeks, it was very frustrating. It took a few months to sort the problem."

I can feel there is a strong will to change things and help companies do good business
Thomas Coutheillas

Some would-be entrepreneurs hit trouble before even starting up. Simon, from Ireland, has a job as a translator in Paris. To supplement his income, he had looked into doing some extra work independently, on a freelance basis.

The town where he lives slapped on a flat-rate business tax of 450 euros. He also found out he would be liable to pay social security and pension contributions, on top of those he already pays in his job.

"I wasn't looking to earn substantial sums of money, only small jobs from time to time," argues Simon. "In the end, I got exasperated and de-registered, and decided not to pursue the enterprise."

Under the government's bill now before parliament aiming to modernise the economy, all charges and taxes on start-up businesses will be abolished until firms turn a profit.

Also, in a bid to boost job creation, costs that have discouraged companies wanting to take on extra employees will be phased out.

French 'resistance'

Such changes could help Laurent, who manages a team of six in a hairdressing salon in the south of France. The 21-year-old claims that high wage costs prevent the company from taking on more staff, even though more are sometimes needed.

"We just have to roll up our sleeves and get on with it," he says. "For each member of staff, the social charges mean the cost to us is virtually double their salary."

A Welldone agent on one of the firm's specially-branded scooters
Welldone's agents need to be able to cope with Paris traffic

It is something of a paradox that the French economy relies on the strength of its small and medium-sized businesses - yet these are precisely the ones who complain most often about restrictions.

The rules may be loosened in due course, but how far is France really going towards becoming more business-friendly?

At Welldone's offices, Thomas Coutheillas argues that despite the company's hiccups with bureaucracy, France is moving in the right direction.

"There is a classic resistance in France," he says, "but I can feel there is a strong will to change things and help companies do good business."

As for the Benmaz fashion designers, they still talk of making it big worldwide. They have their sights set on the UK, the US, and also believe there is business to be done in other markets such as north Africa. Yet significantly perhaps, they are still toughing it out in France.

"Our friends and a big entrepreneur we met all say we are crazy," says Slimane. "It's very difficult being an entrepreneur, you are all alone with your idea and your project."

France's Finance Minister Christine Lagarde has talked of the need to "blow a wind of liberty through the economy". The government's modernisation law should be passed this summer, bringing in new rules.

Whether it will bring with it the change in business culture that many say is needed is another matter.

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