European CEOs’ assessments of business conditions inside and outside of Europe have diverged to the highest levels ever recorded, a study published on Wednesday (29 May) found, as concerns over persistently weak economic growth push many corporate executives to prioritise commercial opportunities abroad.
The 2024 biannual survey of business leaders by the European Round Table for Industry (ERT), a long-standing Brussels-based lobby group, revealed that European CEOs’ confidence in their companies’ prospects outside of Europe surged to a three-year high in the first half of this year, while expectations within effectively stagnated.
In particular, the ERT’s aggregated measure of business confidence outside Europe increased from 59 to 63 in the second half of 2023 to the first half of this year. The evaluation of commercial prospects inside Europe slid slightly from 51 to 50 over the same period. (A reading above 50 equates to a more optimistic than pessimistic overall assessment.)
This discrepancy—the highest ever recorded in the survey’s seven-year history—was especially marked regarding investments and sales.
Just 27% expect investments to increase within Europe over the next six months, compared to 57% anticipating greater investment growth abroad. Similarly, 40% believe sales will moderately increase within Europe over this period, compared to 70% outside Europe.
Employment expectations within the bloc also fell to a three-year low, with more than a third of business leaders projecting a decline in employment over the next six months, compared to just over one in ten outside of Europe.
“Leaders are optimistic for their companies’ investment and employment outside Europe—but within Europe, expectations are a lot less bright,” said Ilham Kadri, head of Syensqo and chair of ERT’s Committee on Competitiveness and Innovation.
“As a place to do business, Europe seems stuck in a path of relative decline,” she added, warning, “Europe’s incoming leadership has to prioritise achieving a turnaround that puts competitiveness front and centre of the work programme from here to 2030.”
Cutting regulations vital to boosting competitiveness
In terms of the main policies required to boost competitiveness, the overwhelming majority (91%) cited the need to improve and simplify the regulatory environment.
Deeper single market integration—a major point of focus among EU leaders in recent months and the subject of a recent report by former Italian Prime Minister Enrico Letta—was named a top priority (73%), as was the need to boost innovation and technological leadership (71%).
In addition, the survey found that business leaders are increasingly worried about Europe’s defensive capabilities, with nearly four in five claiming that they are “not confident” or “not confident at all” enough is being done to boost defence readiness.
The EU-China relationship
The survey also provided a detailed analysis of views on the chief risks to Europe’s increasingly tense relationship with China.
In particular, a majority cited the EU’s efforts to “de-risk” from Beijing and China’s industrial overcapacity as the primary sources of friction in the EU-China relationship.
Meanwhile, more than half of the business leaders interviewed saw China’s relations with the US as one of the five most severe roadblocks to the EU-China relationship.
Other noted sources of tension include access to critical raw materials, trade in green technologies, industrial espionage and cyber-security.
Notably, only roughly a third regard China’s increasing economic ties with Russia as a significant source of tension between Brussels and Beijing. This starkly contrasts the views of China-based CEOs of foreign multinationals, 81% of whom regard Beijing’s ties to Moscow as a chief source of tension.
European executives were significantly more pessimistic about the future of EU-China relations than their Chinese counterparts: more than half said they expect relations to worsen over the next three years, compared to just over a third of China-based CEOs.
“CEOs are clear that Europe’s hurdles are due to cumbersome regulation, failures to integrate the single market fully, and timidity on technological leadership,” said Sara Murray, the international managing director at The Conference Board, a non-profit business organisation.
“With tensions with China expected to worsen and Europe’s defence capabilities creaking, incoming European policymakers have some significant challenges ahead of them,” she added.
[Edited by Anna Brunetti/Rajnish Singh/Alice Taylor]
