This major evolution highlights major structural changes and complex challenges facing the industrial sector. At the heart of these challenges is the closure of factories, an event that goes far beyond the simple cessation of activity. Indeed, the closure of a factory has far-reaching economic, social and fiscal repercussions.
To understand the complexity of these impacts, we are going to look at a concrete example: the TARDIS car factory. It is important to note that the TARDIS factory is a fictional creation. but based on real data from car factories in France. It is designed to illustrate the multiple facets of the consequences of a factory closure. This choice allows us to highlight the economic, social and fiscal implications in an enlightening way, while avoiding confusing this example with a real situation.
By examining in detail the economic, social and fiscal impact of the closure of the TARDIS factory, we will delve deep into the complexity of the consequences of such a situation. Using the profit and loss accounts of car factories in 2022 and an in-depth analysis of the industrial context, this article proposes a scientific exploration of the effects of a factory closure on industrial jobs, economic dynamics, social cohesion and taxation.
1 - Presentation of the TARDIS factory
To give concrete anchoring to our analysis, we are going to introduce the TARDIS factory, a fictional creation that illustrates the consequences of a factory closure. Founded in 1954, this factory is located in the city of La Rochelle in Charente-Maritime, and over the years, it has become an economic pillar of the region.
With a Staff of 1500 (Full Time Equivalent) FTE, encompassing both managers and workers, the TARDIS factory represents a major source of jobs in its immediate environment. Tous employees live less than 50 km from the factory, thus underlining the importance of the factory in the local economic fabric and the contribution to regional employment.
For practical reasons, we would say that TARDIS factory employees receive a Average salary of 2,780 euros net per month (Average salary recorded by INSEE in 2022). These salaries play a crucial role in the economic dynamics of the region and reinforce the financial stability of households.
In 2022, the TARDIS factory completed a net sales of 800 million euros. This financial performance attests to its central role as an influential economic actor, actively participating in value creation at the local level.
The TARDIS factory also has a wider economic reach. Ses expenses with its suppliers amounted to 760 million euros in 2022. Among these expenses, 400 million euros have been invested in French suppliers, thus underlining its role as an economic catalyst at the national level.
Thanks to profits of €6.4 million, the TARDIS factory also generates significant tax revenues. During the year 2022, it paid €5.6 million in income taxes and taxes that benefit local institutions on the national territory. This tax contribution has a direct impact on public finances, supporting infrastructure and social services.
Having outlined the building blocks of the TARDIS factory, we will now discuss the cascading effects of its closure in 2023, looking closely at the direct, indirect, and induced impacts.
2 - Impact on industrial sovereignty
The closure of the TARDIS factory has a direct impact on national industrial production capacity. This factory, as a pillar of local production, contributed significantly to the national offer. With its closure, this production capacity is reduced, which can potentially compromise France's ability to meet domestic demand and to maintain its competitiveness in international markets.
A second crucial point is the impact on France's comparative advantages compared to other countries. The TARDIS factory had been part of the French industrial ecosystem for decades, contributing to France's reputation in the sector. Its closure could alter the competitive advantages accumulated over time, which could impact France's position in global supply chains and its competitiveness compared to other countries.
In addition, the closure of the TARDIS factory may increase France's dependence on imports. By reducing its production capacity, France could be forced to import more products that were previously manufactured locally. It could make theFrench economy more vulnerable to international price fluctuations and supply chain interruptions.
3 - Direct, indirect and induced economic loss
Overall, the closure of the TARDIS factory raises concerns about France's industrial sovereignty, affecting its production capacity, its position in global competition and its dependence on imports. But beyond a macroeconomic impact, the real impact of the closure of a factory is felt at the local level.
The closure of the TARDIS factory leads to a series of economic losses that unfold gradually and extend to various aspects of the economy.
At first glance, the direct economic consequences are obvious. A turnover of 800 million euros are at risk of going abroad, which reduces France's contribution to international trade and affects its trade balance. In addition, the closure deprives the French economy of 6.4 million euros in profits that do notwill further fuel the country's economic dynamic. Indeed, the dividends paid are then used by the beneficiaries to reinvest or consume.
Indirectly, the effects spread to suppliers. The 400 million euros that will no longer be spent with suppliers in France expose these companies to difficulties. This situation jeopardizes not only the jobs of their employees, but also the sustainability of their suppliers, and has a negative effect on their tax contributions, which subsequently has an impact on public finances.
Finally, in an induced manner, the impact also affects local consumption. The 1,500 employees of the TARDIS factory, who represented a annual consumption of 36.8 million euros in local goods and services such as housing, food, and recreation (INSEE calculation method) contributed to the vitality of local shops. We will have to add 51.7 million euros of indirect employment consumption, which we will see in the next part. The closure of the factory endangers these businesses, which underlines the interconnection between the industrial economy and local actors, as shown by the closure of the factory. Electrolux in Revins in 2022.
All of these economic losses, from direct to induced, illustrate the complex ramifications of a factory closure. This concrete example demonstrates how such a closure impacts not only financial data, but also business stability, jobs and local economic life. Now let's look at the impact on employment.
4 - Cascading effects on employment
Before exploring the employment ramifications of the closure of the TARDIS factory, it is relevant to recall the key definitions established by INSEE to better understand direct, indirect and induced jobs. Direct jobs correspond to those created by the factory itself. Indirect jobs refer to those generated by factory suppliers, and induced jobs come from household consumption generated by income from these jobs.
The analysis of indirect and induced jobs reveals significant impacts related to the factory's suppliers. The closure of the factory Unemployment 1,500 direct jobs. In addition, the 400 million euros in supplier expenses in France, which were financed by the factory's activity, represented approximately 1,850 indirect FTEs in France (use of the IN France methodology). These indirect jobs, in turn, contributed to a indirect local consumption of 51.7 million euros.
The exploration of induced jobs, resulting from household consumption, reveals a crucial dimension. The annual consumption generated by direct and indirect jobs reaches 88.5 million euros. This sum, derived from the incomes of workers, has an indirect impact by creating 521 induced jobs. These jobs, although indirect, are also vulnerable in the event of a factory closure.
In summary, The closure of the factory puts 3,871 FTEs in France at risk and deprives 88.5 million euros of consumption Households and local businesses create a perverse effect here: in the case of a car factory, their managers are often very dependent on contractors in local authorities and regions.
5 - Tax Implications
The analysis of the fiscal repercussions of the closure of the TARDIS factory highlights a crucial issue both locally and nationally. The effects spread across different levels of taxation, directly impacting public finances and local investments.
The direct impact on taxation is significant. Les 5.6 million euros in tax revenue that will not be collected constitute a shortfall in public finances, having an impact on both the national and local levels, where these levies are divided between the city hall and the local authorities.
However, the tax losses don't stop there. The 400 million euros in expenses with suppliers in France generate approximately 8 million euros in indirect tax revenue. This indirect dimension amplifies the total tax losses, which now amount to 13.6 million euros.
Finally, it is crucial to take into account the fiscal impact induced by household consumption. The annual consumption of 88.5 million euros leads to the generation of 12.7 million euros in tax revenue induced from VAT, taxes, fees and payments in local businesses.
As a whole, The closure of the TARDIS factory puts at risk a total of 26.3 million euros in taxation in France. This tax loss has direct consequences on public finances, reducing the resources available for social investments and public services. This reality highlights how the closure of a single factory can have a profound and chain impact on the economic and social fabric of a country.
6 - Summary of the territorial impact of the factory closure
The closure of the TARDIS factory would have major repercussions throughout France, resulting in a total economic loss estimated at 1.3 billion euros. This estimate considers various factors, including turnover, supplier expenses in France, local consumption and dividends paid to associates. In particular, a significant portion of this consumption, amounting to 12.7 million euros, contributes directly to local businesses in the territories.
The closure of the factory would result in also a loss of 3,871 full-time equivalents (FTEs) in France, combining the direct, indirect and induced jobs that are all affected by this decision. This loss of jobs would have significant social and economic consequences at various levels of society.
Finally, the impact of the closure extends to taxation. The loss of 26.3 million euros in French taxation highlights the financial consequences for public finances and social investments.
The closure of a factory is an economic, social and fiscal tragedy for the affected regions. However, closer collaboration with institutions, such as the General Directorate of Enterprises and Economic Development Agencies, can sometimes offer solutions to overcome difficult periods.
In addition, early detection of these challenges through the use of territorial impact indicators can transform internal data into a real strategic lever. This makes it possible to better manage territorial anchoring and to ensure a sustainable presence.