In the chic French seaside town of La Baule, the tourist season has not yet started. The Côte d’Amour resort known for its long beach, Anglo-Norman villas and palatial hotels is preparing for the invasion of French and foreign holidaymakers that will swell the 16,000 local population almost a hundredfold.

In his 1922 collection of short stories, Tales of the Jazz Age, F Scott Fitzgerald described La Baule, on France’s Atlantic coast in southern Brittany, as a haven of good taste and refinement. “At the Palace in La Baule we felt raucous amidst so much chic restraint. Children bronzed on the bare blue-white beach while the tide went out so far as to leave them crabs and starfish to dig for in the sands,” he wrote.

Today the water is still too chilly for most bathers, and walkers braving the seafront last week were drenched by spring storms. However, the temperature on the beach has risen beyond boiling, and not because of the weather.

Furious local people have accused officials of “privatising” the three-mile stretch of golden sands that the town’s residents boast is the most beautiful in Europe and lament the decision to give a 12-year contract to manage the beach to a multinational water company, Veolia, which they accuse of not maintaining the resort’s reputation.

The row stems from a bitterly contested 2006 government decree that restricts the activities of private firms on France’s public beaches to 20% of the overall surface. Citing environmental concerns, but also French égalité, the principal target of the decree is the French Riviera, and in particular Cannes, which has seen an explosion of expensive restaurants on its miles of beaches.

Technically there are no private beaches in France, where the country’s coastline – land and sea – is protected and overseen by the environment ministry in Paris. In reality, local councils have been allowed to sell licences to beach restaurants, bars and sun-bed rental firms, rendering swaths of Côte d’Azur sand out of bounds to ordinary holidaymakers.

Hotels and restaurants on France’s Mediterranean coast openly advertise “private beaches”, where a “front row” sun bed can cost more than €100 (£85). The parasol is not always included.

Aerial view over the bay of La Baule. Photograph: Andia/UIG via Getty Images

In La Baule, town hall officials decided the 2006 decree was too controversial and complicated to enforce. Unwilling to enter into battles with well-established local businesses, many of them run by generations of the same family, they decided to pass the buck back to the ministry in Paris. In December 2016 the environment ministry sold the right to manage La Baule’s beaches to Veolia.

As summer approaches, local people say Veolia’s plans will mean even more of the beach is swallowed up and there will be a steep rise in the price of their business licences.

“It’s a totally absurd situation, utterly ridiculous, the sort of madness that only happens in France,” Didier Arino, director of the tourism consultancy Protourisme, told the Observer. “It’s not logical, ecological, and it’s certainly not economical. It will mean a loss of business and harm the attractiveness of France’s beaches, it will reduce the sale of local products, and it will put people out of business at a time when unemployment is already high.

One rule was not good for all, he said. “La Baule isn’t the Côte d’Azur.”

The question of whether money should be a factor in determining access to a beach was in the headlines when French authorities bowed to a request by Saudi Arabia’s King Salman to close a stretch of coastline below a Riviera holiday home during his visit. A petition against the “privatisation” of the beach was signed by more than 100,000 people. As the king had a 1,000-strong royal entourage with money to spend in Riviera shops, however, reaction to the beach closure was mixed.

Last week La Baule’s mayor, Yves Métaireau, said the term “privatisation” did not apply to the Veolia contract. But he admitted to having some sympathy with local concerns. “We are also worried because it’s in nobody’s interest to further weaken the economic tissue of the town and therefore that of the beach, which is one of the major attractions for which La Baule is famous,” Métaireau told AFP news agency.

On Wednesday, Métaireau, who represents the conservative rightwing Les Républicains party, proposed setting up a joint venture company with Veolia, which has helped to calm local anger, but beach business owners are still planning to go ahead with a demonstration next Saturday and at least two lawsuits are pending.

Veolia has said that it wants to make the beach “safer, more attractive, more modern and more environmentally green”. It said it was ready to “enter into discussions” with the relevant state and town hall officials.

However, Loîc Durant-Raucher, the president of the local business association, remained sceptical.

“The aim of a business like Veolia is to make money. It’s not worried about maintaining the kind of family resort spirit we have here,” Durant-Raucher told Le Monde.

Defending the interests of France’s 1,500 beach businesses – 400 of them on the Mediterranean – Arino said they would be asking Emmanuel Macron’s new environment minister, former journalist Nicolas Hulot, to persuade the government to abandon the 2006 decree, but was not hopeful.

“We are very good at making rules in France, even if they are difficult to apply and simply absurd,” he said. “But we will approach Monsieur Hulot and we will try.”