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New research from Accenture, in conjunction with the European Business Summit and the Federation of Belgian Enterprises (FEB), looks at what business leaders in Europe and globally see as the challenges and opportunities for Europe.
The report identifies seven key areas on which Europe must focus to take advantage of the opportunities that are open to it.
After a period punctuated by sovereign debt crises and financial volatility, Europe has managed to pull itself out of an economic tailspin and engineer a modest resumption of growth. But what do its business leaders see as the challenges and opportunities over the coming years?
During March and April 2011, Accenture conducted research to understand the views of C-level executives in Europe and the rest of the world. The research consisted of two components:
An online survey of 402 C-level executives of companies doing business in Europe. Respondents were selected from the Economist Intelligence Unit’s C-level panel, so as to reflect the views of the very diverse base of companies operating in Europe.
Interviews with leaders of companies/organizations operating in Europe. In-depth interviews were conducted over the telephone and lasted, on average, 45 minutes. We have included excerpts from these interviews throughout the report.
More than two-thirds of business leaders from both the European Union and the rest of the world are more optimistic about Europe’s growth prospects than they were last year.
Forty-eight percent of business leaders plan a moderate increase (6 to 20 percent) in their investment levels in Europe over the next three years, and 9 percent plan a much bigger increase (more than 20 percent).
Challenges include high government budget deficits, financial market uncertainty, growing competition from emerging markets, inflation, persistently high unemployment, weak private sector investment, currency fluctuations and skills shortages.
Reducing and simplifying taxes and regulations (53 percent) and dismantling barriers to cross-border trade within the European Union (39 percent) were the top actions cited as most effective in encouraging the growth of small to mid-size businesses.
Looking ahead, Europe must prepare for a world that is being transformed. The region’s population is ageing and the squeeze on global resources—including land, water and food—is a major concern. The worldwide financial crisis and recession have accelerated the shift to a multi-polar world, where economic activity and power are gravitating away from the core developed economies of the last century toward the powerhouse emerging economies.
Europe must not recoil from these trends but must reframe them as opportunities for growth and job creation. An ageing population will generate growth opportunities in health care, third-age education, leisure, tourism and age-related consumer markets.
With its global leadership position in environmental technologies, Europe is ideally situated to benefit from booming demand for intelligent energy, green infrastructure, alternative fuels, and waste and water management. Its expertise in many types of services gives Europe a head start in emergent sectors such as carbon finance and consultancy. Look closely at the driving forces of emerging-market growth—a growing middle class and increased urbanization—and it is easy to see major opportunities for Europe to trade on its expertise in areas such as financial services, education, infrastructure and citizen services. Emerging markets need all of these services, and Europe can supply them competitively.
Drawing on detailed research and our survey of more than 400 C-level business leaders, this study identifies actions in seven key areas that can help position Europe to harness new waves of economic growth:
Economic governance: a base for stronger growth. In addition to restoring public finances, Europe must tackle budget deficits and debt levels, increase coordination on fiscal policy among European countries and develop early warning systems to spot asset bubbles, and move to a pro-growth agenda through fiscal policy and tax cuts.
Entrepreneurship and SMEs: breaking the ceiling. Europe must make it easier for SMEs to grow by simplifying regulation and taxation, helping them engage in import and export, and helping them grow—for example using technology to build virtual scales or using cloud computing to drive down costs.
Human capital and labor markets: bridging the gap. Europe must capitalize on its large pool of educated workers by reducing rigidities in labour markets and matching longer term skills provision with future jobs through investment in science, technology, engineering and mathematics (STEM) skills and improved lifelong learning.
ICT and social media: digital highways to growth. Europe must increase widespread use of ICTs by promoting superfast broadband, strengthening legislation on data security, and promoting IT literacy among its population.
Innovation: creating a pan-European innovation ecosystem. Europe must improve commercialisation of the raw ideas and global research it generates through actions that include completing the single market in services, establishing standards to enable interoperability, and providing better methods of valuing intangible assets related to services innovation.
Industrial strategy: a future for Europe in the global economy. Increased competition and disruptive business models drive the need for Europe to simplify regulation and tax; strengthen the links between industry and services (servitization); and develop a pan-European industrial strategy.
Trade and investment: building new bridges in a multi-polar world. As the world’s largest trading bloc, Europe needs to supplement the Doha trade negotiations with regional and bilateral free-trade agreements; attract investment from emerging markets; and help European enterprises do business in emerging markets.
July 5, 2011
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