Helsinki School of Business

The Energy Sector in France and the United Kingdom

Project work for the course
Business in the EU

by

Thomas Leutbecher

Table of Content

A) Introduction 1

B) Analysis 1

I Comparative Analysis: France vs UK 1
Basic Economic Indicators 1
Market Sector Opening 2
Consumption 3
Production 3
Prices 4
SWOT analysis of French Energy 4
SWOT analysis of United Kingdom Energy 6
Comparison of Analysis 6

II Europe′s Pollution 7

III The Energy Sector and the EU 7
The importance of EU legislation 7
Competition law 8
The Four Freedoms and their impact 10
Enlargement 11
EMU 12
Niche market 12
Cultural Issues 13

C) Conclusion 13

D) Sources I

E) Appendix II

Tables II

A) Introduction

This course work deals with the energy sector of France and the United Kingdom, in context of the European Union. The first part concentrates on the analysis of the countries energy sector and their comparison. In the second part this analysis is brought into perspective within the European Union.

As for the sources of information and their validity and quality, we used primarily the youngest publications of the European Union, since this data is compared with others the most accurate and up to date. But we also took other international sources into consideration, newspapers as well as official energy sources.

B) Analysis
The analysis of the two countries France and the United Kingdom in this context is best done by comparing them. Nevertheless, the attempt to compare these two bares certain problems. Therefore the comparison will be done based on EU-publications in order to have not only a common but also most up-to-date source¹.

I Comparative Analysis: France vs UK

The structure for the comparative analysis is divided into five groups: basic economic indicators, market sector opening, consumption, production and prices. The complete data tables can be found in the Appendix under the individually indicated numbers (e.g. table 2.3.3).
Before going into specific distinction, very basic information on the relation of the two countries: France is a member of today′s EU since 1958, the United Kingdom not until 1973. The population doesn′t vary extremely between France′s 59.1 mio and UK′s 59.9 mio (eurostat ′99).

Basic Economic Indicators

The differences between France and the UK, when looking at general economic data, aren′t too big, compared to other European countries. The GDP (nominal) ranking in 1999 leaves the UK at place 2 and France at place 3 with a difference of `only′ €3 billion (table 1.1). The GDP growth rate in 2000 in both countries still is under the EU average (3.4%). A bigger contrast can be observed when looking at socio-economic figures (table 1.2), such as the unemployment rate. Here the EU-average is 8.3% in 2000 and France exceeds these numbers by 2.2 percentage points. The United Kingdom though managed to achieve numbers as low as 5.5%. Another contrast would be the share of employment in the agricultural field: The UK has the lowest percentage in the EU (1.6%) whereas France plays in the middle field in EU-comparison.

Market Sector Opening

Distinguishing in respect to the energy sector is a tricky task, since the two countries have almost totally different systems. The reason to choose the opening of the market (table 2.3.2) as basis for comparison is, that it reflects best the interests of the countries. Due to the different production capacities, as described later on, the UK has a great interest of importing energy, whereas France is one of the biggest, if not the biggest exporter in Europe. Surprisingly enough, the UK has a very regulated market for energy, but France shows a big privatization trend. This might be explainable with the resources of oil in the UK, although in world comparison this doesn’t account for much. Back to the market opening, it almost seems controversial how France can be as ‘closed’ as it is in respect to the import dependency of fuels (table 2.2.5). But logically, since France is such a big exporter of energy, there certainly is an industry to protect. Speaking in figures, France’s electricity market opening by end-2000 was 30% and UK’s opening was 100%. It is interesting to know, that the EU-directive on opening of the single electricity market requires a minimum opening of 30% in 2000. Looking at the gas market (table 2.3.3), France is even lower with 20% opening, the United Kingdom here has again 100%. The EU directive, if not changed by then, allows an adjustment to 33% minimum opening until 2008 in this market.

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1 Publication: European Union, Energy and Transport in Figures 2001