Banque de France Bulletin no. 235: Article 4 Capital operating times plummeted in 2020 amid the unprecedented use of teleworking. Results of the survey conducted by the Banque de France in September 2020

In 2020, capital operating times (COT) decreased by 4.9% in the manufacturing industry. This decline, comparable to the downturn in the industrial production index (IPI), reflects adjustments made by businesses to address the shock caused by the health crisis.

There was a significant increase in teleworking, particularly in large companies. The factors behind this strategy include not only firms’ desire to reduce health risks, but also issues linked to well-being at work. There are, however, various barriers that limit its implementation, such as the inability to do some jobs remotely, the risk of productivity losses, and difficulties accessing digital technology.

The accelerated implementation of teleworking resulted in an unexpected increase in investments by companies during the first lockdown period. Going forward, the use of teleworking is likely to be sustained at above pre-crisis levels, affecting investment and corporate real estate.

1 Capital operating times plummeted in September 2020 but should rebound in 2021

The Banque de France production conditions survey provides information on short-term adjustments made by companies to respond quickly to changes in demand. When faced with an unexpected rise or fall in demand, businesses initially adapt by adjusting their capacity utilisation rate (CUR) and capital operating times (COT). They then adjust the amount of labour and capital required – see in particular the study by Cette, Lecat and Jiddou (2016), which draws on this survey data.

COT decreased in line with industrial activity

In September 2020, COT declined by 4.9% year-on-year, following a 1.6% year-on-year increase in September 2019 (see Chart 1). Following this unexpected downturn in 2020, COT were 7.5 points below the level forecast by companies in 2019 for 2020. The reduction in COT is comparable in size to the fall in industrial activity over the same period, as measured by the industrial production index (IPI). The capacity utilization rate (CUR) also fell from 77.1% in September 2019 to 73.1% in September 2020. These figures reflect an economic downturn due to the health crisis and a continuing slowdown in activity in September 2020.

The expectations of companies surveyed are fairly positive for COT, which is expected to rebound in 2021 (+4.4%).

The effects of the crisis have been heterogeneous across companies, depending on their size and sector (see Chart 2 below). In 2020, large companies made more significant reductions in COT (–5.9%) than small and medium-sized enterprises (SMEs: –4.1%), but the former expect a stronger rebound in 2021 (+5.3%) than the latter (+3.8%). In the transport equipment sector,
companies reduced their COT more sharply than the rest of the industry
, with a 14.6% decrease between 2019 and 2020. This sector also expects the strongest rebound in percentage terms: +7.4% in 2021.

To adjust COT and optimise the use of their capital stock, companies can change employees’ working hours or adapt their use of shift work, an intensive working arrangement whereby several operators work in turn on a given workstation to optimise the use of equipment.

Weekly working hours decreased

Another way companies can reduce COT is by decreasing weekly working hours. Between 2019 and 2020, they fell from 36.4 hours to 36.0 hours on average (see Chart 3 below).

This dynamic was very similar for both SMEs and large companies. The decrease was sharper in…

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Banque de France Bulletin no. 235: Capital operating times plummeted in 2020 amid the unprecedented use of teleworking. Results of the survey conducted by the Banque de France in September 2020
  • Published on 07/22/2021
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Updated on: 07/22/2021 09:25