- Competitiveness & Innovation
European Competitiveness and Industry – Benchmarking Report 2019
European Competitiveness and Industry
As we prepare to enter a new decade, the European economy is facing difficult times. The global economic environment is becoming weaker. World trade growth is diminishing and economic ripples from trade and geopolitical conflicts are increasingly evident. Open and export-oriented European economies are suffering from weaker demand for investment goods and durable consumer goods such as cars. Homegrown problems are adding to this, most notably the uncertainty on the timing and final conditions of the British exit from the European Union.
But aside from the recent signs of a cyclical downturn and intensifying political interferences many indicators of this new ERT Benchmarking Report illustrate that Europe’s competitiveness is under threat.
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On top of that, the comparatively small global share of European unicorns points to barriers for scaling innovative businesses in the EU.
However, a changing market environment is also providing new opportunities for Europe. Climate protection and sustainability are rapidly gaining importance on the political and societal agenda. Europe has committed itself to ambitious targets for the reduction of CO2 emissions, an increase of energy efficiency and a higher share of renewable energy. Regarding these ambitions, Europe is already a global leader. Now Europe must prove that sustainability and economic growth are not opposites, but two sides of the same coin. To reconcile both targets, a conducive environment for innovation and development of new technologies is extremely important. Many aspects are relevant here: a smart regulatory framework, e.g., applying the ‘innovation principle’ across all policy areas as a complement to the precautionary principle, as well as leveraging regulatory sandboxes to detect the best regulatory approaches. We need an open and science-based dialogue on the opportunities and risks of new technologies, as well as tax incentives for basic research and development. Finally, the availability of risk capital is crucial if new ideas are to truly gain the lift they need to make it to the market place.
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Among other factors, sufficient and cost-competitive supply of clean energy and raw materials is needed to keep long industrial value chains as a center of innovation and as a backbone for long-term economic growth in Europe.
This report presents a comprehensive overview of key indicators and compares European economies with their international partners in the areas of macroeconomics, competitiveness, trade/investment, innovation/science, digital economy, energy/climate and employment/skills.
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This new ERT Benchmarking Report illustrates that Europe’s competitiveness is under threat. Unit labour costs are rising in major European economies as wage growth exceeds productivity growth. Global export market shares of European manufacturers are in decline in the long-term. Improvement and extension of Europe’s digital and telecom infrastructure lag significantly behind international competitors. While Europe remains a global center of research and development it has already fallen behind its peers – such as China, the US, Japan and South Korea – in terms of R&D expenditures relative to GDP.
There is quite a lot to be done and the decade ahead of us demands real progress, if Europe is to retain its place in the world. While pursuing the transition of the European economy and energy sectors towards circular and sustainable business models, the international competitiveness of the European industry must be maintained.