Brussels: Business leaders are more pessimistic and more urgently demanding change--but, despite this, remain optimistic about the European Union's long-term prospects for prosperity and global prominence. This is a core message of the 2013 State of the European Union (E.U.) Survey released today by Booz & Company, INSEAD, and the European Executive Council (EEC).
'Overall, the mood is one of impatience with a strong call to action: Business is demanding that the E.U. 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?' says Per-Ola Karlsson, senior partner at global management consultancy Booz & Company.
The survey report, 'Growing Europe: The Competitiveness Imperative', reveals that corporate leaders are more pessimistic about Europe than they were last year (61 per cent compared to 52 per cent). And 88 per cent believe the E.U. urgently needs to implement policies to bridge the European competitiveness gap and raise productivity. However, the good news is that 72 per cent of corporate leaders do believe the E.U. is capable of achieving positive change, and looking ahead to 2030, they say the E.U. will remain one of the top global powers.
'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', says Javier Gimeno, academic director, INSEAD European Competitiveness Initiative.
Even with a potential U.K. referendum looming on the political horizon, business leaders do not believe the E.U. 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 advocate that, this being the case, their voices must be heard by policymakers.
However, this does not mean applying a 'one size fits all' solution across the continent. 'The E.U. can act as an orchestrator: Countries don't have to sing in unison but the E.U. should entice them to sing in harmony', says Bruno Lanvin, executive director, INSEAD European Competitiveness Initiative.
'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 shows that in countries where the economy is stronger, business leaders are open to adjusting the European social model if it helps solve the high unemployment and low productivity that is holding Europe back'.
Key findings include:
- Eighty-two per cent of corporate leaders see a gap between Europe's competitiveness and that of other regions, and 49 per cent believe this gap will increase in the next 10 years.
- Restoring Europe's productivity is the key economic priority of 88 per cent of respondents; the majority believe that growth will be spurred by small and medium-sized businesses, not multinationals or state-owned enterprises.
- Eighty-eight per cent believe the E.U. 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.
- Fifty-nine per cent 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.
- The policies for growth require a rethink of social models, where applicable. For instance, 91 per cent of respondents say the best way to balance budgets and improve productivity is by increasing the economic incentives to work.
- Youth unemployment is a key concern; over 70 per cent 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
- 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 E.U.'s shrinking budgets.
- Eight out of 10 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.