Manufacturing renaissance requires Europe to lead in energy efficiency, technology innovation and reaching the changing consumer
BRUSSELS; May 16, 2013 – The vast majority of Europe’s business leaders and senior decision makers say Europe must grow the size of its manufacturing sector if it is not to lose its competitiveness, according to a new study by Accenture (NYSE: ACN) on behalf of BUSINESSEUROPE. The study, published in a report, Unlocking Industrial Opportunities, also reveals executives’ concern about Europe’s competitive weaknesses in technology innovation, high energy costs and skills.
The study, which included a survey of over 500 C-level executives across the EU, shows that while short term business confidence remains weak, business leaders are more optimistic about Europe’s long term prospects. Sixty one percent think that the economic crisis will continue and that Europe will struggle to recover well in the next three years. Nevertheless, 64 percent believe that despite current growth rates, European industry remains internationally competitive.
The report, presented to policy and business leaders at the European Business Summit in Brussels, reveals that 82 percent of respondents believe Europe must raise manufacturing’s share of EU GDP by a quarter, from 16 percent today to 20 percent, in order to achieve long term economic competitiveness. Yet, a small majority (53 percent) is not confident that current EU policies will help achieve this.
The results reveal divergent views across Europe. German respondents are significantly more confident about Europe’s prospects for economic recovery and competitiveness. They are also optimistic that EU policies can help lift industrial output’s share of the economy.
“Europe is not homogeneous and the crisis has exposed different levels of competitiveness between countries,” said Mark Spelman, managing director at Accenture. “While that has caused monetary tensions in the Eurozone, this diversity is an asset that Europe must exploit if it is to achieve an industrial renaissance and maintain a range of competitive sectors. But diversity also means that policy responses must be increasingly tailored to the needs of individual economies.”
The report highlights three waves of change that pose threats, but which European decision makers could turn into growth opportunities.
While survey respondents unanimously recognize the importance of technology innovation for the future competitiveness of European industry, more than two thirds (71 percent) believe that China will be level with or ahead of Europe in technology innovation in ten years’ time, including 55 percent who believe China will be ahead. The top three demands for action are reduced taxation for R&D, higher public investment in R&D and technology, and improved conditions for the financial sector to back innovation.
Fifty eight percent of decision makers responding to the survey are pessimistic that Europe’s industry will be cost effective in energy compared to other main markets in three years’ time. Nine in ten respondents say it is important or critical that Europe reduces its energy import dependence to allow for industrial growth. The two main actions identified to address energy challenges are improved energy efficiency and the development of renewable technologies. This suggests that decision makers do not see a contradiction between the need to remain competitive with other countries in the short term while investing in a low carbon economy in the longer run.
Survey respondents identify changing patterns of consumption as having the most significant disruptive impact on European industry (71 percent of respondents). And yet they are optimistic they can tackle the challenge. The majority (55 percent) think that European industry is ready to address these changes in the European market, rising to 60 percent who think it is ready to do so in emerging markets.
“Energy, technology innovation and changing consumption patterns are potentially disruptive to Europe’s industry but also offer huge opportunity for growth and competitiveness,” said Spelman. “By focusing on these three waves of change, Europe’s policy makers and businesses are more likely to boost manufacturing’s share of GDP. Such approaches in all three areas are helping the U.S economy regain manufacturing competitiveness. It is possible for Europe to do so too.”
Skills and Finance Improvements Needed
The Accenture report identifies the rebuilding of skills and reinvigorated finance as the two principal enablers of capitalizing on the three waves of change. However, while two thirds of German respondents consider their workforce competitive, on average, 53 percent of European decision makers disagree, rising to 78 percent in Spain. Investment in education and training for ‘jobs of the future’ is regarded as the priority response. Improved language skills and the use of technology to enable lifelong learning are also cited as priorities.
The report reveals that the lack of corporate investment in Europe is being held back by uncertainty of demand and, in some places, declining profitability. But changing regulation is not restoring confidence. Fifty six percent of surveyed executives are not confident that the European Commission’s new financial regulations will efficiently support the financing of corporate investment. Respondents most commonly point to better access to capital markets (54 percent) and greater venture capital funding for start-ups as the priority actions needed to reverse the current decline in business investment.
“Eurozone companies are sitting on approximately €2 trillion of cash and the EU has over 25 million unemployed people in its labor market, “said Spelman. “Unlocking this enormous financial and human capital is crucial to underpin other efforts to recapture growth and improve Europe’s competitiveness.”
“Europe needs a strong and competitive industry for sustainable growth – and that requires a well thought through industrial policy to create jobs and growth,” said BUSINESSEUROPE President, Jürgen R. Thumann. “We need to think outside the box of our common political thinking and must put industrial competitiveness back at the center of the EU’s policymaking. This report, outlining many of the pathways forward, gives food for thought for all participants of this year’s European Business Summit. Now let’s get down to business!”
To read the full report please visit www.accenture.com/ebs
Accenture is a global management consulting, technology services and outsourcing company, with 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US $27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com
+ 44 77400 38921