EU business demands change, but remain optimistic

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EU business leaders are pessimistic and are urgently demanding change — but remain optimistic on the long-term prospects for prosperity and global prominence. This is the core message of the 2013 ‘State of the European Union’ survey released today by Booz & Company, INSEAD, and the European Executive Council (EEC).

Flags of the European Union.
Flags of the European Union. Image courtesy: flanders

The 2013 State of the European Union survey reveals an urgent call to action for EU leaders.

The survey report; Growing Europe: The Competitiveness Imperative reveals that corporate leaders are more pessimistic about Europe than they were last year (61 percent compared to 52 percent). And 88 percent believe the EU needs to urgently implement policies to bridge the European competitiveness gap and raise productivity.

The good news is that 72 percent of corporate leaders believe the EU is capable of achieving positive change, and looking ahead to 2030, they say the EU will remain one of the top global powers.

Per-Ola Karlsson; “Overall, the mood is one of impatience with a strong call to action: Business is demanding that the EU take bold steps to promote economic, political, and social policies that directly address growth. There should be no sacred cows. The question is, will European leaders have the courage to act?” — Per-Ola Karlsson, senior partner at global management consultancy Booz & Company

Javier Gimeno; “Business leaders want to move the debate beyond whether budget austerity or growth stimulation will revitalise Europe. Nine-out-of-10 respondents call for targeted actions to improve productivity and competitiveness.” — Javier Gimeno, academic director, INSEAD European Competitiveness Initiative

Even with a potential UK referendum looming on the horizon, business leaders do not believe the EU will lose member countries. However, they clearly believe tough decisions need to be made.

The report analyses the responses of 1,500 executives both in and outside Europe who were asked about the economic, social, and political aspects of the European Union. The report will be presented today at the third annual State of the European Union conference in Brussels.

Corporate leaders strongly believe the business sector will drive growth and this must be heard by policymakers.

However, this does not mean applying a ‘one size fits all’ solution across the continent.

Bruno Lanvin; The EU can act as an orchestrator: Countries don’t have to sing in unison but the EU should entice them to sing in harmony. Business leaders do not reject the European social model, but favour incentives to work—more flexibility in working hours, pensions, and wages—to help boost growth and reduce unemployment. The data show that in countries where the economy is stronger, business leaders are open to adjusting the European social model if it helps to solve the high unemployment and low productivity that is holding Europe back.” — Bruno Lanvin, executive director, INSEAD European Competitiveness Initiative

Key findings include:

Economy

1.    Eighty-two percent of EU business leaders see a gap between Europe’s competitiveness and that of other regions, and 49 percent believe this gap will increase over the next 10 years.

2.    Restoring Europe’s productivity is the key economic priority of 88 percent of respondents; the majority believe that growth will be spurred by small and medium-sized businesses, not the multinationals or state-owned enterprises.

3.    Eighty-eight percent believe the EU could do more to represent business on a global stage, for example, negotiating stronger trade links, but it will have to overcome the perception by non-European business leaders that Europe is a fragmented collection of markets rather than a single block.

Society

1.    Fifty-nine percent of business leaders remain committed to the core principles of the European social model and favour increased alignment on minimal standards for health, education, and welfare.

2.    The policies for growth require a rethink of social models, where applicable. For instance, 91 percent of respondents say the best way to balance budgets and improve productivity is by increasing the economic incentive to work.

3.    Youth unemployment is a key concern; over 70 percent of business leaders are looking for tax incentives to hire more young people and investments and subsidies to help in retraining the current workforce.

Technology and Innovation

1.    Six-out-of-10 respondents believe the lack of innovation culture is a key obstacle to economic growth and development in Europe. To boost innovation, business leaders favour public/private collaboration and tax incentives for private investment in R&D, given the EU’s shrinking budgets.

2.    Eight-out-of-10 EU business leaders are most concerned about the innovation threat from China and are less worried than in previous years about similar competition from India, Japan, and the United States.

Download the full report here: www.booz.com

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