The UK's vote to leave the EU adds further fuel to the Eurosceptic, far-right Front national (FN) less than a year ahead of the 2017 presidential election. We now expect France's relationship with the EU to be at the heart of the campaign.

The vote also obliges France to negotiate a new role in the EU, in which it is a key player. We expect François Hollande, the president, to aim to make the UK's exit from the EU into a cautionary tale, so far as is possible without long-term damage to the French economy.

The main establishment parties—and especially the ruling centre-left Parti socialiste (PS)—will be very wary of holding a referendum on the EU, having lost one previously, in 2005.

Economically, the weaker pound, the hit to confidence from volatile financial markets and the likelihood of constraints on the UK's access to the single market all pose significant threats to the fragile French economy. We expect the deepest hit to growth to be in 2017.

We continue to expect the centre-right Les Républicains candidate to win the presidential election, but the risks to this forecast have risen. We will be revising down our forecasts for French growth throughout 2016‑20 to reflect the economic shock of Brexit.

Brexit has come as an unwelcome shock to the French political establishment. The biggest threat on the domestic front is the risk of a rise in Euroscepticism and a further surge in the polls for the leader of the FN, Marine Le Pen. Mr Hollande may take some comfort in a post-Brexit poll indicating that the majority of French voters do not wish to follow the UK's example and quit the EU. However, Euroscepticism is even higher in France than in the UK, with only 38% of French voters declaring themselves to be in favour of the bloc, and a separate poll indicating that a majority of French voters want their own referendum on a French exit from the EU, dubbed "Frexit".

Although no such referendum is on the cards at present, the entire debacle plays into the hands of the FN by placing the party's favourite topics, such as immigration, failing elites and Euroscepticism, at the heart of the political agenda. Unsurprisingly, Ms Le Pen is now calling for a referendum on a French exit from the bloc—by which she means a wholesale exit from the EU, euro zone and passport-free Schengen area—although she is the only political leader in France to do so.

Presidential candidates stake out their positions in advance of the 2017 vote

The political establishment, and the PS in particular, are still scarred by their defeat in a 2005 referendum on the European constitution, which exposed deep divisions within the party and a disconnect between political elites and disenchanted voters. Mr Hollande's failure to carry through on his 2012 electoral pledge to reform Europe, curb the liberal agenda of austerity and restore growth has led to further disappointment. This is therefore a sensitive issue for him, and comes at a difficult moment, when the economic fallout from Brexit risks further damaging his electoral prospects in 2017.

Other prospective presidential candidates are already identifying their positions with regard to Brexit. On the left of the spectrum, Arnaud Montebourg, a PS defector who is likely to challenge Mr Hollande in the recently announced left-wing primary next January, has indicated that the solution has to lie in addressing the sense of alienation and abandonment that underpins disaffection with the EU. Emmanuel Macron, the ambitious economy minister who launched his own political movement in April, and who is a possible pretender for the PS presidential nomination, wants to place Europe at the heart of the presidential debates, and has once again spoken off-message to present his own vision for the future of Europe.

On the right, the front-runner in the primary election for Les Républicains, Alain Juppé, has declared that the EU needs to be reformed from within, and has lamented the weakness of Mr Hollande and his inability to take a commanding role in negotiations. Mr Juppé's main rival, Les Républicains' leader and the former president, Nicolas Sarkozy, has called for a redesign of the EU, culminating in a new treaty that would require approval from the French people via a referendum. As usual, this places him somewhere between the stances taken by Mr Juppé and Ms Le Pen, although he has resisted going so far as to endorse calls for an in/out referendum.

Hollande is keen to make an example of the UK

On the international scene, Mr Hollande has to consider how best to secure France's interests post-Brexit. France wants to reassert itself as a leading force within the reconfigured EU, but its fragile economy and its difficulties in adhering to EU budget rules place it in a weaker position than Germany. France's expansionary and protectionist visions of Europe are therefore unlikely to prevail. France does now have the upper hand in defence negotiations, however, as a nuclear power and the EU's only remaining standing member of the UN Security Council.

Although it is not in France's long-term political or economic interests to come down too hard on the UK, the immediate political context requires a firm approach. The more the UK is seen to suffer the consequences of withdrawal from the EU, the better it can serve as a cautionary tale aimed at quelling the rise of Euroscepticism within France and across Europe. France is keen not to stoke separatist proponents in Corsica, and has therefore refused to negotiate with Scotland separately from the rest of the UK. Even mutually beneficial bilateral arrangements with the UK, such as French company EDF's role in the construction of a British nuclear-power plant at Hinkley Point, and border management at Calais rather than Dover, are now subject to greater uncertainty.

Negative hit to the French economy will be concentrated in 2017

The economic shockwaves of Brexit present both risks and opportunities for France. In the short term, the shocks to the international stockmarkets have hurt French businesses and damaged confidence at a time when the French economic recovery is still very fragile. A weakened pound also increases the cost of French exports to the UK, while reducing the cost of imports from British competitors. The uncertainty that has been a feature during most of the second quarter, weighing on investment spending as firms and consumers put off decisions, is now likely to continue for at least the next two years, as the UK negotiates the terms of its exit agreement. Our forecast of a recession in the UK in 2017 means that French growth will be hit most significantly in that year as external demand—and sentiment more generally—suffers.

In the longer term, everything depends on the deal negotiated with the UK. If the UK retains access to the single market and respects the four freedoms—of goods, capital, services and people—that come with it, then the economic impact may be relatively contained. If not, then the imposition of trade tariffs might reduce French exports to the UK. Our core forecast is a UK-EU deal that sees the UK, outside the EU, gaining partial limits on migration from the EU at the cost of partial constraints on services trade with the bloc, although this is subject to a high level of uncertainty.

One upside risk is that France might become a beneficiary of companies seeking to relocate out of the UK in order to retain their access to the benefits of the EU. This is especially hoped for in the area of financial services, with Mr Hollande taking a tough initial line on the "passporting" agreement that allows euro trades to be completed in London, in the hopes of attracting companies to Paris. There is also a question of the many French expatriates in the UK—and London especially—who might be tempted to bring their talents back to France if the UK becomes less economically attractive and socially welcoming.