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Unlocking Industrial Opportunities: European Business Summit 20131

An initiative of Carried out by

An EU strategy for competitivenessEuropean Business Summit 2013

Welcome to the European Business Summit 2013Europe’s key meeting place for business leaders, diplomats, the public sector, politicians and EU policy makers.

Contents

Foreword� 3

Executive�Summary�� 6

Times�Are�Difficult�Now,�but�� 10Are�Better�Days�Ahead?

Addressing�the�Key�Industry�� 16Disruptors�and�Barriers

Focus�on�Three�Waves�of�� 20Growth�Opportunities:��Changing�Consumer�Behaviour,�Energy�Efficiency,�and��Technology�Innovation

Key�Enablers�to�Growth:�� 28Talent�and�Financing

The�Final�Word� 33

Appendix:�Survey�Results� 34

Key Findings 10

An initiative of Carried out by

3Foreword

ForewordBy José Manuel Barroso, President of the European Commission

Evidence-based policy making is an essential element of the better regulation efforts that the European Commission has been carrying out for over a decade and I therefore welcome this interesting study commissioned by BUSINESSEUROPE and the Federation of Enterprises in Belgium and carried out by Accenture.

Learning about business perceptions of the challenges ahead of us and listening to their suggestions on the best possible solutions to tackle those challenges is a valuable contribution to the work the European Commission is doing to speed up economic recovery.

We share your views on the importance of working for a stronger industry in Europe. Your study identifies very neatly the nature of the problems business is facing. It seems clear that our views also coincide on the importance of problems such as the cost of energy, the need to rebuild skills and finance and fostering innovation. The Commission is working on these issues in the context of the Europe 2020 strategy for smart, sustainable and inclusive growth and in implementing our industrial policy, which aims to increase industry’s share of GDP to 20% by 2020.

All the information and suggestions we can get to be more effective in reaching our long term goals and speeding up the recovery will be most welcome.

By Antonio Tajani, Vice President of the European Commission

To produce sustainable growth, create jobs with high added value and solve the societal challenges we face, Europe needs to stem the declining role of industry in the 21st century.

Through the Communication on Industrial Policy, adopted in October 2012, the European Commission proposed to reverse the current negative trend and to increase industry’s share of the EU’s GDP from today’s 15.6 percent to 20 percent in 2020.

To achieve this goal, I proposed a number of priority actions to encourage investment in new technologies. These should improve our business environment, facilitate market access and financing, particularly for SMEs, and ensure that we develop the skills that match industry’s needs.

European industry is well placed to assume this central role in our economy: Europe is a world leader in many strategic sectors such as automotive, aerospace, engineering, space, chemicals, and pharmaceuticals. Industry still accounts for 80 percent of Europe’s exports and also 80 percent of private sector investment in R&D from manufacturing.

We cannot continue to let our industry relocate outside Europe. Our figures are clear: European industry is essential to generate growth and create jobs in both the medium and long term.

I think it is necessary to make every effort to recover confidence and to allow Europe’s industry to better perform and commence regrowth. We need concrete actions to help our businesses to access emerging markets and restore our continent‘s entrepreneurial spirit. Through the multiplier effect, growth in industry will also result in increased activity in related economic sectors.

The support of businesses and entrepreneurs is obviously essential for the success of these measures, and crucial for the future of the European economy. For this reason, I fully support this study by the European Business Summit. The study’s results, describing the expectations of firms vis-à-vis European and national authorities, are an essential element for the implementation of an industrial strategy in Europe.

4 Unlocking Industrial Opportunities: European Business Summit 2013

It’s time to put the European economy back onto a growth path! A strong political commitment is needed to make European industry grow so that it can create much needed jobs across our continent.

Industry remains the central driver of economic competitiveness, accounting for the lion’s share of exports, investment in research and development and jobs – 45 percent of Europe’s workforce – as each job in the industrial sector is linked with at least two high-quality jobs in the service sector.

Last year, the Commission proposed to increase the contribution of industry to Europe’s gross domestic product from currently 16 percent to 20 percent by 2020. This ambitious target can be met by making industrial policy an imperative for the European Union and its member states.

In this way, European industry can tackle the challenges lying ahead to unlock new business opportunities – as identified in this report – to regain its competitive position in the world. I am convinced that our industry is able and ready to step up to the task of competing successfully in global markets to help Europe achieve its industrial growth target.

Europe needs a strong and competitive industry for sustainable growth while the European industry needs a well-thought-through industrial policy to create jobs and growth for Europeans. This report outlines many of the pathways forward. Now let’s get down to business!

By Jürgen R. Thumann, President of BUSINESSEUROPE

Europe is on the threshold of a New Industrial Revolution. It is high time to reindustrialise in a modern and sustainable way for the 21st century.

In short, industry is taking centre stage in EU policy.

The policy-making agenda has to be business driven. Measures are needed to improve labour productivity, support innovation, and invest in talent in order for Europe to retain a competitive position on world markets. Energy supply, as well as our digital and transport networks, needs to be efficient, affordable and reliable. New markets are emerging, and traditional consumer patterns are evolving in both new and established markets, fuelled by the online revolution. At the same time, there is little perspective of improvement in the economic climate in the short term, and this is taking a toll in terms of stagnation in investment, unemployment levels, and general business confidence.

With so much at stake, the Federation of Enterprises in Belgium and BUSINESSEUROPE commissioned this report, to

Capture the state of health of industry today

Analyse the key elements (‘disruptors’) that will influence business development

Pinpoint the barriers standing in the way of growth

Make recommendations which can be translated into policy and regulation to support the growth and competitiveness of EU industry

What industry needs and in which regulatory environment this can be optimised will be the core theme of this year’s European Business Summit. This unique forum for debate between business and policy makers will turn the key that will unlock industrial opportunities for European businesses.

Henry Ford

�“�The�competitor�to�be�feared�is�one�who�never�bothers�about�you�at�all,�but�goes�on�making�his�own�business�better�all�the�time.”

By Pieter Timmermans, CEO, Federation of Enterprises in Belgium

5

Harnessing technology innovation, improving energy efficiency and understanding new consumer behaviours will be critically important to European manufacturers as they seek to maintain their competitiveness and achieve long-term growth.

These are the conclusions in the following report, “Unlocking Industrial Opportunities,” published by Accenture on behalf of BUSINESSEUROPE and the Federation of Enterprises in Belgium. The report looks at how senior business and government decision makers across Europe view manufacturing and what it will take to remain competitive, eliminate barriers to success, capitalise on opportunities for growth and achieve long-term business goals.

The current state of the European manufacturing industry is a major concern as industrial output has declined and unemployment continues to climb. Yet despite several years of economic challenges at home and abroad, the decision makers surveyed remain hopeful of a brighter future. In fact, two-thirds of these leaders are confident that European industry remains competitive internationally.

One surprising finding in the research was a blurring of the old boundaries between the manufacturing and services sectors. The survey revealed that a new convergence of opinion is evolving among decision makers in both the manufacturing and services industries on how criticially important it is to strengthen manufacturing in order to secure Europe’s long-term future. That is good news considering that the revitalization of the European manufacturing industry will depend on finding the right combination of manufacturing capabilities and services development.

The research also uncovered three waves of change that, while challenging, offer significant growth opportunities for European industry: technology innovation, energy efficiency and changing consumer behaviour. A stronger emphasis on technology innovation will be central to achieving future growth as technology has quickly become a driver of market differentiation. Every manufacturing business will become a digital business – a strategic imperative for manufacturing industry competitiveness.

By focusing on these three waves of change, Europe’s policy makers and businesses are more likely to boost European manufacturing and Europe’s competitiveness. It is possible for Europe to adapt to a rapidly changing environment, but in order catch these waves, time is of the essence. We hope that decision makers find the report relevant and actionable.

By Pierre Nanterme, Chairman & CEO of Accenture

71%of respondents think China will have reached or overtaken Europe in technology innovation in 10 years’ time.

55%think that European Industry is ready to address consumer behaviour changes in Europe... rising to 60% for Emerging Markets.

58%are pessimistic that European industry will be energy cost-competitive compared to other main countries like US, China or Russia in 3 years’ time.

Foreword

According to the most current data from Eurostat and other respected sources, the European economy continues to struggle to recover from the most recent financial and economic crisis. Industrial output and unemployment are particular areas of concern, as the former has dipped precipitously and the latter continues to climb. In the face of these challenges, European industry must find a way to unlock growth opportunities and restore its competitiveness on the international stage.

61%of respondents believe the European economic crisis will continue and Europe will struggle to recover well in the next three years.

64%of repondents believe Europe’s industry is competitive internationally.

Executive Summary


7

Times are difficult now, but are better days ahead?Our research found that executives participating in the survey recognised the serious state in which European industry finds itself: A majority of executives think the economic crisis will continue and Europe will struggle to recover during the next three years, and they are worried that Europe will fall behind China in technology innovation within a decade. Furthermore, a number of industry disruptors and barriers exist that European industry must address to improve its performance.

However, there is a consensus to recognise the importance of industry to Europe’s future: Nearly all said industry is either important or critical to innovation in Europe, European economic growth, and overall European economic competitiveness. Furthermore, a large majority of executives recognised the need to increase European industrial output from 16 percent to 20 percent of GDP by 2020 to achieve long-term economic competitiveness.

One of the surprising results of the survey is the convergence of views between executives working in manufacturing industries and executives working in services regarding the criticality of manufacturing industries for the future of Europe, and the priorities to unlock industrial opportunitiesi. This convergence can be explained to a large extent by the fact that the boundaries between the manufacturing industry and related services are getting blurred, and executives in both sectors are more and more aware of the continuum of activities and mutual interests.

We also found a relatively high degree of optimism among survey participants. A large majority of executives acknowledged the importance of industry to Europe’s future: Half believe Europe’s economic crisis has inflicted only temporary damage on European industry and that Europe will recover soon, and two-thirds are confident European industry remains competitive internationally.

Three waves of growth opportunitiesAs they seek ways to reignite growth and strengthen European industry’s competitiveness, business and government leaders must be aware of three waves of change that are rippling across the global economy. These waves offer considerable growth opportunities on which European industry can capitalise with the right approaches and policies:

Understanding changing consumer behaviour, both in and outside Europe

Improving energy cost-competitiveness and energy efficiency

Capitalising on technology innovation and advanced manufacturing

Two key enablers to growthOur research further found that two enablers will be especially key to Europe’s ability to capitalise on the growth opportunities inherent in the three waves of change: workforce and finance. To unlock Europe’s growth potential, actions need to be taken to

Rebuild skills

Reinvigorate financing

Recognising the diversity of Europe Of course, Europe is far from a homogenous market. Indeed, our survey identified a wide range of differences in attitudes and insights across the countries represented by participating executives. That is why, when defining the appropriate actions and policies to address the growth challenge, it is critical to recognise the diversity of the European economies and tailor responses to the unique conditions and needs of various sectors and individual countries. While diversity has caused monetary tensions within the euro zone, it also is a major asset that, if exploited effectively, can enable European industry to drive competitive differentiation, greater value, and robust growth in the years ahead.

i The core report presents the results on the total sample and more results are available in the appendix.

The European Business Summit Survey 2013 initiated by BUSINESSEUROPE and the Federation of Enterprises in Belgium and carried out by Accenture was designed to research the current state of European industry and gain business and government leaders’ insights on potential solutions to the problems Europe faces. The results of this survey are presented in this report prepared for the European Business Summit 2013 that took place in Brussels.

Executive Summary


Our research has identified three waves of growth opportunities

Changing consumer behaviourThe first wave of change our survey identified is understanding the changing consumer. About seven in 10 executives most often cited changing patterns of consumption among customers and rapid growth of emerging markets as among the most critical developments affecting their business. It is critical for European industry to address these changes in consumer behaviour as they directly impact on the way to connect and interact with B2C as well as B2B customers.

Prioritising actions

Businesses need to consider three key priority actions1 in order to stay close to changing consumers and to achieve sustainable growth:

Develop a cutting-edge analytical toolkit that enables them to continuously assess and respond to changes in consumer behaviour

Instill an adaptive mindset that helps them anticipate or respond quickly to disruptive market forces

Create an agile organisation to introduce the right capabilities to act on fast-developing opportunities

Improving energy cost-competitiveness and energy efficiencyThe second wave of change relates to energy. A majority of respondents have doubts that European industry will be cost-competitive from an energy standpoint in three years’ time compared with other geographies. Europe must take steps to address the challenge of current higher energy costs without delay while anticipating the future with actions to drive sustainable improvements in energy efficiency and leverage opportunities in renewable energy.


Respondents highlighted priority actions in order to address Europe’s energy challenges and to decrease Europe’s dependency on external energy resources:

Improvement of energy efficiency

Support of opportunities in renewable technologies

Development and expansion of grid infrastructure

Investment in low carbon energy technologies (including nuclear generation capacity)

Completion of the Single Market Act in energy

Technology innovation and advanced manufacturingThe third wave of change involves technology innovation and advanced manufacturing. While survey respondents unanimously recognise the importance of technology innovation for the future competitiveness of European industry, more than two-thirds believe China will be level with or ahead of Europe in technology innovation in 10 years’ time. As technology is becoming a primary driver of growth and profitability in an expanding list of sectors, public policies are needed to boost the development and dissemination of technology innovation through the European manufacturing industry.


Executives highlighted a number of actions that could help boost technology innovation, including:

Reducing taxation levels for R&D and capital investment

Investing more public funds in R&D and technology

Creating conditions for the financial industry to back innovation

Improving support for small businesses and startup enterprises

Encouraging education and industry collaboration

Supporting the development of innovation clusters

Two key enablers to growth

The workforce factorIn Europe today, companies continue to experience workforce challenges, and a majority of executives in our survey believe the workforce in general is not currently a competitive advantage for European industry.


To change that condition, business and governments must consider a wide variety of potential steps. When asked to name the four actions that would be most important to improving the competitive advantage of the European workforce for European industry, executives most often cited, in order of priority:

Developing public and private investment in education and training for jobs of the future in the industry

Improving workers’ language skills to enhance their mobility across Europe

Using technology to enable lifelong learning and development of skills

Increasing the number of graduates in science/technology/engineering and maths

Improving apprenticeship opportunities

9

The finance factor Our survey found that European companies are reluctant to invest in the European economy primarily because of lack of profitability and uncertainty of demand. The result is more than €2 trillion in cash on hand at companies across the euro zone.


Executives believe a number of actions are critical to unleash this cash to boost demand, increase output, and create jobs. In order of priority, they are:

Enabling better access to capital markets

Greater venture capital funding for startups

New public financing for small and medium-size enterprises

More conducive payment terms

Extending credit risk financing for exports to emerging markets

82%agree with the need to increase European industrial output from 16 percent to 20 percent of GDP by 2020.

47%consider the workforce is currently a competitive advantage for European industry.

56%are pessimistic the new EU financial regulation will efficiently support financing of corporate investment in Europe.

Executive Summary

It is no secret that the past few years have been difficult for Europe, and that European industry, in particular, has suffered greatly as a result of the economic crisis. Even more troubling is the fact that Europe still has much work to do to restore growth and competitiveness to its industries. Europe’s recovery from the recession has stalled, with manufacturing output once again trending downwardii and lower than the rest of OECD countries (Figure 1).

Reversing this industrial decline is critical given the important role that industry plays in the European economy and society at large. According to the European Commission, industry still amounts to 80 percent of private sector R&D and 80 percent of Europe’s export.

Executives who participated in the European Business Summit Survey 2013 – initiated by BUSINESSEUROPE and the Federation of Enterprises in Belgium and carried out by Accenture (see “About the Research” on page 11 for details on the survey) – clearly recognise how important industry is to Europe’s future. Nearly all said industry is either important or critical to innovation in Europe, European economic growth and overall European economic competitiveness (Figure 2). There also is broad agreement among executives (82 percent) with the European Commission’s stated goal of increasing Europe’s industrial output from around 16 percent to 20 percent of GDP by 2020 to achieve overall long-term economic competitiveness.

Times Are Difficult Now, but Are Better Days Ahead?

Key Findings

ii The decline in production has been particularly strong in capital goods and intermediate goods whereas the decrease has been less dramatic in nondurable consumer goods.


About the ResearchTo identify the current and future industry trends in Europe, as well as the actions needed to seize the opportunity of the New Industrial Revolution and to strengthen the competitiveness of the European economy, Accenture commissioned a survey of more than 500 decision makers across Europe.

Industry coverage

The sampleA total of 355 C-level executives representing European businesses and 155 public sector leaders were interviewed

The sample included a broad mix of industries, ranging from chemicals to banking, retail, manufacturing and services.

Size of organisationsFour sizes of companies were represented:

Geographic scopeThe sample included 16 countries* across Europe, including at least a 10 percent representation each from France, Germany, Italy, Spain, and the United Kingdom.

FieldworkThe survey was executed by Kadence International via online questionnaire in February 2013.

For the purpose of this survey, industry includes manufacturing, raw materials extraction, energy, and associated services, such as transportation, logistics, and information and communications technology services.

*Austria, Belgium, Cyprus, Denmark, Estonia, France, Germany, Greece, Italy,

Luxembourg, Netherlands, Poland, Portugal, Spain, Slovakia, and the United Kingdom.

42%of business executives represented manufacturing or energy companies.

58%represented service companies.

small (less than 50 employees)

12%

medium(between 50 to 500 employees)

20%

large(between 500 to 10,000 employees)

42%

Very large (more than 10,000 employees)

26%

11Key Findings


However, executives also expressed some concern about the state of European industry and its ability to address current and emerging challenges.

For instance, many executives are not convinced the worst of the economic problems is behind them. Sixty-one percent of respondents believe the European economic crisis will continue and Europe will struggle to recover well into the next three years, compared with 39 percent who think the darkest days of the crisis have passed and the European economy will start to recover in that timeframe. Respondents in France, Spain, the United Kingdom and Italy are most likely to believe Europe’s struggles will continue, while a majority (57 percent) of respondents in Germany believe the worst is over (Figure 3).

In that context, Germany is the most preferred destination for investment in the next three years. However, China, the United States, and Brazil are mentioned before other European countries (Figure 4).

Another concern executives expressed relates to Europe’s ability to maintain a strong competitive position in innovation. For instance, a majority of respondents (55 percent) believe that in 10 years Europe will be behind China in technology innovation, while 16 percent said Europe will be level with China in a decade (Figure 5). This concern is not surprising as Europe is losing ground on R&D intensity (Figure 6), a situation that directly impacts on Europe’s long-term competitiveness.

Figure 2: How important is industry for European economic growth, innovation and overall economy competitiveness? (%)�a,�b

97% 97% 96%

0

20

40

60

80

100

3 3 4

38 42 47

59 55 49

Innovation in Europe

European economic

growth

Overall European

competitiveness

Critical Important

Not very important Not very important at all

61%of respondents believe the European economic crisis will continue and Europe will struggle to recover well in the next three years.

Jürgen R. ThumannPresident, BUSINESSEUROPE

“�Europe�needs�a�strong�and�competitive�industry�for�sustainable�growth�while�European�industry�needs�a�well-thought-through�industrial�policy�to�create�jobs�and�growth�for�Europeans.”

Figure 1: The EU industry is losing momentum (%)

Source: Accenture Research based on OECD main economic indicators debate, Eurostat, 2012Source: European Commission2

Q4

2001

Q4

2005

Q4

2009

Q4

2003

Q4

2007

Q4

2011

Q4

2002

Q4

2006

Q4

2010

Q4

2004

Q4

2008

Q4

2012

European Union (27 countries)United States OECD Total

Total industry productionIndex 2005=100

85

90

95

100

110

105

13Key Findings

Figure 3: Which of the following best describes your view? (%)�a,�b

Overall Italy UK Spain France Other Germany0

20

40

60

80

100

0

20

40

60

80

100

31

69

35

65

35

65

38

62

44

56

57

43

39

61The European economic crisis will

continue and Europe will struggle to recover well in the next three years

The worst of the European economic crisis is over and the European

economy will start to recover well in the next three years.

a Base: All respondentsb Source: Accenture European Business Summit Survey 2013c Top-10 countries mentioned

Figure 4: In which geographic areas will your company accelerate the most its investment in the next three years? (%)�a,�b,�c

% mentioned in top 3

Germany 32

China 26

US 21

Brazil 20

France 16

UK 16

India 13

Italy 12

Spain 11

Russia 10

Figure 5: Do you think Europe will be ahead of or behind China in 10 years in terms of its technology innovation? (%)�a,�b

0

20

40

60

80

100

55

29

16

Behind China

Level with China

Ahead of China

90%of Executives in Germany are the most likely to say Europe is competitive.

64%of respondents overall believe Europe’s industry is competitive internationally.

55%believe China will have overtaken Europe in technology innovation in 10 years’ time.


Figure 7: How would you assess Europe’s international industrial competitiveness? (%)�a,�b

Despite these concerns, nearly two-thirds of executives overall believe Europe’s industrial sector remains competitive internationally (Figure 7). Executives in Germany are the most likely to say Europe is competitive (90 percent), but that view also is shared by about six in 10 respondents in the United Kingdom, Italy and France. Only in Spain did a slight majority (51 percent) believe European industry is not internationally competitive. Interestingly, executives from the private sector are more likely than government leaders to say Europe’s industry is competitive internationally (67 percent versus 57 percent).

a Base: All respondentsb Source: Accenture European Business Summit Survey 2013

Antonio TajaniVice President, European Commission

“�Europe�is�a�world�leader�in�many�strategic�sectors�such�as�automotive,�aerospace,�engineering,�space,�chemicals,�and�pharmaceuticals.”

Figure 6:�Trend in R&D intensity

0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

2.13

2.01

1.70

1.20

0.74

0.57

2.65

2.54

2.02

1.25

1.09

0.78

Japan South Korea (2010)

US Japan (2009)

South Korea US (2009)

EU China (2009)

Russia EU (2011)

China (2001) Russia (2010)

R&D Intensity Business enterprise sector (2000)

R&D Intensity Business enterprise sector (latest available year)

Source: Eurostat, total intramural R&D expenditure (GERD) by sectors of performance

0

20

40

60

80

100

0

20

40

60

80

100

36

64

10

90

20

80

41

59

42

58

44

56

51

49Competitive

Not Competitive

France SpainGermany Other UK ItalyOverall

Interestingly, executives from the private sector are more likely than government leaders to say Europe’s industry is competitive internationally.

67% vs 57%

15Key Findings

Addressing the Key Industry Disruptors and Barriers

Key Findings

16

iii Game-changing developments or innovations that challenge or suddenly render obsolete the established order of a market, industry, or entire economy.

Game changers: Seizing the speed of change and the scale of impactDisruptors can bring with them great opportunities for well-prepared companies but spell disaster for those that are caught unaware. A disruptor’s importance largely depends on two main factors: the speed at which it causes change and the scope or scale of the expected impact of that change. Today, European industry faces many disruptors that, at once, offer tantalising promise for growth as well as the potential to prolong Europe’s slump. Europe certainly has to take advantage of those disruptors to benefit from additional growth potentials.

When asked to rank the three disruptors that they believe could have the greatest impact on European industry, respondents most often cited changing patterns of consumption among customers (71 percent), and rapid growth of emerging markets (68 percent) (Figure 8). These disruptors likely rose to the top because of their urgency: They are issues companies must address now as a prerequisite to restoring growth.

Other disruptors also were considered as very important: Reacting to Europe’s shift to a low carbon economy (60 percent), development of advanced manufacturing (53 percent), and improvement of trans-European networks – both physical and digital infrastructures (47 percent).

In this context, business and government leaders must confront and overcome a variety of disruptorsiii and barriers that, if not addressed, could threaten to impede their efforts to restore growth to European industry.


17

Figure 8: What are the key disruptors for European industry, i.e. have the potential greatest impact on European industry?�(%)�a,�b

Changing patterns of consumption (e.g., aging new consumers’ behaviours) 71

Rapid growth of emerging markets (e.g., BRIC etc.) 68

Move to a low carbon economy (e.g., low carbon energy efficiency, etc.) 60

Development of advanced manufacturing (e.g., 3D printing, biotechnology) 53

Improvement of Trans-European networks (physical and digital infrastructures) 47

Ranked within top 3 choices

Figure 9: What are the most important long term barriers to Europe’s international industrial competitiveness? (%)�a,�b,�c�

Red tape and complex rules of the Single Market 48

Europe’s labour regulations and social employment costs 42

High cost of energy in Europe 34

High levels of corporate taxation 32

Insufficient support for R&D and technology innovation 31

Lack of support for small, start up enterprises 23

Fragmentation of European internal market 23

Lack of a risk taking financial services sector (including venture capital) 21

Poor levels of educational attainment 16

Insufficient Trans-Europeean networks (physical and digital infrastructures) 12


a Base: All respondentsb Source: Accenture European Business Summit Survey 2013c Top 10 long term barriers mentioned

These issues are not less important than the demand-related ones; however, the fact that they were less frequently named a top-three concern reflects the reality that these are longer-term issues to be addressed over a period of many years and, thus, executives feel less of a sense of urgency to confront them now.

Barriers: Overcoming a high diversity of long-term barriersExacerbating the impact of the aforementioned disruptors are numerous barriers that executives believe could stifle European companies’ progress toward stronger performance if not sufficiently addressed. The top three barriers identified by executives were (Figure 9):

Burdensome regulation.

Lack of flexibility of labour market.

High cost of energy.

The question of regulation is often mentioned related to energy due to the expectations to make some progress towards the development of a competitive internal market and the rise of ’smart regulation’ including implementation, enforcement, evaluation, and revision of policies.

Other barriers that were named by approximately three in 10 respondents included high levels of corporate taxation, and insufficient support for R&D and technology innovation.

Key Findings


Figure 10: Are you aware of the following EU initiative relating to growth and competitiveness? (%)�a,�b

0

20

40

60

80

100

27 32 42

50 48 45

23 20 13

Lisbon Agenda

(2000-2010)

EU2020(2010-2020)

Communication on Industrial Policy (2012)

You are aware of it (and know the

objectives & content)

You are aware of it (but do not really know

the objectives & content)

You are not aware of it

Figure 11: Do you agree with the need to increase European industrial output from around 16 percent to 20 percent of GDP by 2020, and how confident are you that European policies will achieve that objective? (%)�a,�b

53%

0

20

40

60

80

100

48

5

2

45No – 18%

Yes – 82%

Very optimistic

Optimistic

Pessimistic

Very pessimistic

Figure 12: How confident are you that European policies will achieve the objective of increasing the share of industry to 20 percent of GDP? (country view) (%�Optimistic)�a,�b

0

16

32

48

64

80

0

16

32

48

64

80

47 72 65 52 46 36 29

FranceSpainGermanyOtherOverall UKItaly

82%agree with the need to increase European industrial output from 16 percent to 20 percent of GDP by 2020.

13%Only a minority know the objectives and content of the recent European Commission Communication on Industrial Policy.


19

As was the case with disruptors, what executives perceived to be among the three most significant barriers varied considerably by country.

Executives in Germany were the most likely to cite red tape and complex rules of the Single Market, as well as high cost of energy; but were least likely to see lack of support for small and startup enterprises as a barrier. Those in France were the most likely to identify Europe’s labour regulations and social employment costs, as well as high levels of corporate taxation, but the least likely by far to name the high cost of energy.

Executives in Spain were most likely to name lack of support for R&D and technology innovation and poor education. The United Kingdom was second only to Germany in the percentage of executives citing red tape and complex rules of the Single Market. That was by far the most commonly named barrier among UK respondents.

Policy initiatives: Improving the understanding and knowledge of EU initiativesThe European Commission has taken action to address these disruptors and barriers. Three initiatives, in particular – the Lisbon Agenda, the EU 2020 package, and the recent European Commission Communication on Industrial Policy – have been enacted to restore growth and competitiveness of the European market. However, there is limited knowledge of these initiatives among participants in our survey. While the majority of respondents indicated they have heard of these three major initiatives, the percentages of respondents overall indicating they are aware of and know the objectives and content of them are small: 23 percent for the Lisbon Agenda, 20 percent for the EU 2020 package, and only 13 percent for the European Commission Communication on Industrial Policy (Figure 10).

Furthermore, perceptions are mixed about the efficiency of current European policies. There is a consensus on the need to increase European industrial output from around 16 percent to 20 percent of GDP by 2020 to achieve overall long-term economic competitiveness. However, a slight majority (53 percent) of respondents overall are pessimistic or very pessimistic that these policies are sufficient to achieve that objective (Figure 11). That view is not shared equally across countries. For instance, more than six in 10 executives in Germany, slightly more than half of those in Italy, and nearly half of respondents in Spain are optimistic that European policies will be effective in spurring the importance of European industry. Conversely, only about one in three executives in the United Kingdom and France are optimistic (Figure 12).

53%are pessimistic European policies will achieve the increase of industrial output to 20 percent of GDP.

48%Red tape and complex rules of the Single Market is the top ranked barrier to industrial competitiveness.

71%Changing patterns of consumption is the top ranked disruptor for European industry.

José Manuel BarrosoPresident, European Commission

“�In�order�to�unlock�industrial�opportunities�following�from�a�new�industrial�revolution�and�to�aim�at�20%�industry�share�in�GDP�by�2020,�we�need�to�address�issues�such�as�simplification�and�consistency�of�the�regulatory�framework,�energy�costs,�skills�and�human�capital,�access�to�finance�and�SMEs’�needs.�All�this�requires�a�high�level�of�cooperation�and�mutual�understanding�between�private�economic�actors�and�public�sector�authorities.”

Key Findings

Focus on Three Waves of Growth Opportunities:Changing Consumer Behaviour, Energy Efficiency, and Technology Innovation

Key Findings

Changing Consumer BehaviourPositioning the issue

The first wave is about dealing with the changing demand of consumers, both at home and in international markets, especially emerging markets where a new middle class is growing fast.

Customer behaviour change, while challenging to address, is also creating important growth opportunities around the world. In the past, companies could grow simply by focusing on the ‘where’ and ‘who’ of consumption – places such as emerging markets and growing customer segments such as the elderly.

Today, two additional elements are critical: the ‘how’ and the ‘why’. Both areas have undergone rapid change in recent years. It is critical for businesses to address those changes as they impact on the way to connect, interacting with B2C as well as B2B customers. For instance, a consumer survey that was part of a recent Accenture research study3 identified 10 dimensions of consumer behaviour change that are affecting the ways in which, and the reasons why, consumers buy (see box on page 21).

As they seek ways to reignite growth, business and government leaders must be aware of three waves of change that are rippling across the global economy. These waves represent considerable growth opportunities on which European industry can capitalise with the right approaches and policies.


Key dimensions of consumer behaviour change (Energising Global Growth – Understanding the Changing Consumer, Accenture research report 2013)

Based on a survey of 10,000 consumers in 10 countries, Accenture identified 10 dimensions of consumer behaviour change that are affecting the ways in which, and the reasons why, consumers buy:

1 Connected consumers are always on. For example, a large majority check e-mail before going to bed at night. They are never far from a purchasing channel at any time.

2 Social consumers interact with companies, institutions and each other through the Internet. For example, more than half of consumers reported that they increasingly use social media to interact with family members.

3 Co-productive consumers are now a factor in the means of production. For example, they told us they more frequently provide direct feedback to companies and help design products.

4 Individual consumers spend to express their particular personality and uniqueness: They want tailored offerings that will bring out who they really are.

5 Experiential consumers want more than the digital world can offer. They seek the enjoyment of new and different experiences, from traveling to new places to attending live events.

6 Resourceful consumers can seem like a familiar type: They work hard and spend thriftily to get ahead. The difference today is that they turn to new online platforms to buy used products, sell directly to other consumers, or participate in online auctions.

7 Disconnected consumers like to distance themselves from the constant presence of the digital world and are willing to spend to do so. One in five reported that they turn off their phones for extended periods. But they still want products and services that help them leave the stresses of the world behind, ranging from scented candles to cruise vacations.

8 Communal consumers devote extensive time and money to causes with social impact – and they appreciate businesses that do the same.

9 Conscientious consumers more frequently buy local, more often make what they need, and consider the environmental impact when deciding what to purchase. Also, they give away what they no longer need.

10 Minimalist consumers purchase second-hand products or reuse them. They may, for example, prefer car-sharing schemes to outright possession, tending to value access over ownership.

21Key Findings


How well equipped is European industry to respond to these changes? A majority of executives in the European Business Summit Survey 2013 believe European industry is capable of addressing consumer behaviour changes in Europe as well as in emerging markets. Yet a sizeable percentage still say challenges remain (Figure 13).


Businesses need to consider three key priority actions4 in order to stay close to changing consumers and to achieve sustainable growth:

Develop a cutting-edge analytical toolkit that enables them to continuously assess and respond to changes in consumer behaviour

Instill an adaptive mindset that helps them anticipate or respond quickly to disruptive market forces

Create an agile organisation to introduce the right capabilities to act on fast-developing opportunities

Improving energy cost-competitiveness and energy efficiencyPositioning the issue

The second wave relates to energy – specifically, the high cost of energy in Europe, which has become one of the biggest threats to the competitiveness of European industry. When compared with other regions of the world, industrial energy costs in Europe are substantially higher, as illustrated by recent trends in natural gas prices (Figure 14).

The European Business Summit Survey 2013 confirms that executives think the current energy challenges may have lasting and devastating impacts if no decisions are taken: A majority of respondents (58 percent) are pessimistic or very pessimistic that European industry will be cost-competitive from an energy standpoint in three years’ time compared with other geographies such as the United States, China, or Russia (Figure 15).

In addition to the cost of energy, executives expressed concern about the sources of that energy. A substantial majority of respondents believe it is either critical (41 percent) or important (50 percent) for Europe to decrease its dependence on non-European energy supplies to drive industrial growth (Figure 16). That view is consistent across countries, although those in Spain (72 percent) are far more likely, and those in Germany (25 percent) far less likely, to say reducing dependency is critical.


Overall, most respondents believe actions to improve energy efficiency and support opportunities in renewable technologies are among the three most important steps for addressing Europe’s energy challenges in the long term (Figure 17). This demonstrates 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.

Specific actions need to be taken in order to encourage the use of and facilitate the uptake of renewables:

Support the development of an energy infrastructure, back-up capacity, and other flexible solutions (e.g., demand-side management, storage) to connect renewable generation, complete the internal energy market, and enhance security of supply across Europe

Enforce a better market integration of renewable energies

Ensure a better coordination of national support schemes for renewable energies promotion across Europe to gain cost efficiency

Find economically, environmentally, socially, and technically feasible solutions for the challenges with regard to the intermittency of various renewable energy sources

The development and expansion of grid infrastructure and interconnectors are also key to address European energy challenges. Technically sound and cost-effective technologies must be used (e.g., smart grids).

Investment in low carbon energy technologies (e.g., nuclear generation capacity) will also enable countries to tackle the cost-competitiveness and climate challenges.

One-third of executives also cited the importance to complete the Single Market Act in energy to efficiently address the energy challenges in Europe.

23

Figure 13: Do you think that European industry is ready to address consumer behaviour changes? (%)�a,�b

Consumer behaviour changes in Europe (e.g., stagnation of purchasing power,

aging etc.)

Consumer behaviour changes in Emerging Markets (e.g., rise of

new middle class)

0

20

40

60

80

100

45

55

40

60 Yes

No

Figure 15: How confident are you that European industry will be cost-competitive from an energy point of view compared to other main geographies like the US, China or Russia, in three years’ time? (%)�a,�b

58%

0

20

40

60

80

100

52

6

3

39

Very optimistic

Optimistic

Pessimistic

Very pessimistic

Figure 16: How important is it for Europe to decrease its current dependency on non-European energy supply to allow for industrial growth?�(%)�a,�b

91%

0

20

40

60

80

100

50

8

41

1

Critical

Important

Not very important

Not important at all

Figure 14: Price of Natural Gas in the United States and in select EU countries (%)�a,�b

10

20

30

40

50

60

70

80

GermanyFrance OECD Europe USUK

2004 2005 2006 2007 2008 2009 2010 2011 2012

Pierre NantermeChairman & CEO, Accenture

“�Harnessing�technology�innovation,�improving�energy�efficiency�and�understanding�new�consumer�behaviours�will�be�critically�important�to�European�manufacturers.”


Natural gas prices for industryin $/MWh (GCV basis)

Key Findings


Level of priority differs by country. Investment in renewables had greatest support among respondents in Italy and Spain. Smart grids were most popular among those in Italy, while completing the Single Market in energy was most likely to be cited by those in Germany. Nuclear energy was most frequently named a top-three action, and by a considerable margin, by those in the United Kingdom.

In addition to those specific actions, successful European policies on energy will require a competitive internal energy market and a comprehensive climate and energy strategy to support competitiveness and sustainable growth.

Making Technology Innovation and Advanced Manufacturing a Top PriorityPositioning the issue

The third wave involves technology innovation and advanced manufacturing.

In an uncertain and fast-changing environment, innovation has become absolutely vital to a company’s ability to develop its competitive advantage to compete, grow and be profitable in the long run. That includes innovation across the enterprise but especially in technology, which is now the greatest source of innovation and likely will continue to be so for the foreseeable future. Examples of technology innovation that has had a massive impact on the business world include biotechnology, nanotechnology, advanced materials, photonics, micro- and nano-electronics, advanced manufacturing systems, and information technology (such as social media, mobility, cloud computing, and collaboration platforms).

Executives in our survey clearly recognise the key role technology innovation plays today. Nearly all (97 percent) respondents said technology innovation is important to competitiveness, with 56 percent believing it is critical (Figure 18). That perception is all the more important given the challenges highlighted earlier, as well as the major technology trends that are having a significant impact on how companies can and should do business today and in the future. More and more, ’every business is a digital business‘ (see box on page 26).5

Figure 17: What priority actions should be taken to address the energy challenges in Europe? (%)�a,�b

Improvement of energy efficiency 68

Investment in renewables 63

Investment in Smart Grids 38

Investment in nuclear generation capacity 36

Single Market in energy 33

Improvement of non EU energy supply 23

Investment in shale gas 23

Investment in clean coal 17


Figure 18: How important will new technology innovation be for the future competitiveness of European industry (%)�a,�b

97%

0

20

40

60

80

100

41

56

3

Critical

Important

Not very important Not important at all


Examples of technology innovation that has had a massive impact on the business world include biotechnology, nanotechnology, advanced materials, photonics, micro- and nano-electronics, advanced manufacturing systems, and information technology (such as social media, mobility, cloud computing, and collaboration platforms).

25Key Findings


Seven Key Technology Trends That Are Impacting Businesses (Accenture Technology Vision, 2013)

Companies looking to capitalise on technology innovation should consider seven key technology trends5 that Accenture expects to have a significant impact on technologies and businesses in the coming years:

1 Relationships at scale

Businesses today have new ways to learn about consumers – all based on richer digital interactions. Whether through e-mail, social media, the Web, online chat, or location-based services, or on the many mobile devices consumers use today, building relationships at scale is about creating meaningful interactions with consumers wherever they are and whenever they need it. But it’s not just about deeper insights. New technology means enterprises must shift from a focus on cost and channels, to a focus on using the channels and the data derived from them to build longer-term and productive relationships.

2 Design for analytics

Organisations are no longer suffering from a lack of data; instead they’re suffering from a lack of the right data. Winning companies are those that truly make data their strategic asset to drive business outcomes. This means starting with the outcome they desire, understanding the data required, and then using newer technology to get the right data – from inside and outside the enterprise. These companies will treat data less as a warehouse and more as a ’data supply chain’. They will manipulate it, add to it, update it, and analyse it in various ways, transforming the data into new products and business insights.

3 Data velocity

This trend focuses on matching the speed of data to the speed of decisions. Today, thanks to unstructured data from social media, mobile devices, sensors, and applications, the volume of data and data sources available to business leaders is greater than ever. But large amounts of data are not helpful unless companies can make sense of it. New technologies across the ecosystem are enabling companies to scan tens of billions of records a second or query 1 to 2 terabytes in less than a second. In the process, they are helping accelerate the whole data cycle from insight to meaningful action.


European industry should consider a number of steps that businesses and government can take to foster and maintain technology innovation. A good starting point is the list of actions executives in our survey cited that could help them tackle this important challenge. Six initiatives in particular were each named by approximately three in 10 executives as among the three most important actions that could help to spur technology innovation and enable European industry to keep pace with or surpass other regions’ efforts (Figure 19):

Reducing taxation levels for R&D and capital investment

Investing more public funds in R&D and technology

Creating conditions for the financial industry to back innovation

Improving support for small businesses and startup enterprises

Encouraging education and industry collaboration

Supporting the development of innovation clusters

However, challenges and priorities differ across Europe, and those differences are reflected in what was most frequently cited as top-four actions to spur innovation in each country:

Improving support for small businesses and startups in France and Italy

Encouraging education and industry collaboration in Germany

Reducing tax levels for R&D and capital investment and investing more public funds in R&D and technology in Spain

Reducing R&D and capital investment taxes and creating conditions for the financial industry to back innovation in the United Kingdom

How Europe decides to respond to that diversity, and how well that response aligns with the unique situations in each country, will largely determine the success of business and government in putting European industry back on the track to prosperity.

27

4 Seamless collaboration

Advances in technology make it easier than ever for people to work together. But employees don’t necessarily need to become more social for collaboration to work. It’s the work and the process that need to be social. When that happens, it will transform the nature of work. The new face of collaboration will involve embedding social-driven, collaborative tools – such as Yammer, Chatter, JAM, and OpenSocial – into business processes. Organisations will be more productive, more efficient, and more innovative as a result.

5 Software-defined networking

Software-defined networking, or SDN, involves managing the network through software instead of through hardware, and it is a giant leap forward in enterprise flexibility. SDN addresses a significant need: It makes it easier for businesses to manage change, integrate cloud services, and get more return from their network investments. SDN allows companies to remove the complexity and reduce the cost of network reconfiguration, and turn the network into a truly dynamic and flexible asset.

6 Active defence

Companies are recognising that protecting their digital assets from threats must go further than prevention. Protection policies must acknowledge that attackers will get through, so companies need to stay one step ahead of them. Active defence technologies are emerging to help companies know, and hide from, their enemies. Sophisticated data- and analytics-driven information security are shifting the security emphasis from monitoring to understanding to taking preemptive action. And approaches such as turning computer systems into a ’moving target‘ are making it harder for hackers to find and exploit vulnerabilities.

7 Beyond the cloud

Companies no longer should be asking why they should use the cloud or which cloud technologies they should use. Rather, the key question is how to use the cloud to deliver value to the enterprise. Whether it’s infrastructure, platforms, or applications in the cloud, there is much more organisations can do to use the cloud to enable their business. And as organisations embed the cloud into the fabric of their IT, they will need to manage a mix of on-premise and off-premise technology – legacy systems and traditional software mixed with cloud-based technology – as well as a mix of public and private clouds.

Figure 19: What priority actions should be taken to boost technology innovation within the European industry? (%)�a,�b,�c

Reduce taxation levels for R&D/capital investment 34

Invest more public funds in R&D and technology 33

Create conditions for financial industry to back innovation 31

Improve support for small businesses and start up enterprises 30

Encourage education/industry collaboration 29

Support the development of Innovation clusters (i.e. similar to Silicon Valley) 29

Increase Science/Technology/Engineering and Maths graduates 21

Make public procurement more open to small innovative enterprises 18

Invest in European digital infrastructure (broadband for all) 16

Improve the deployment of current European initiatives 16


a Base: All respondentsb Source: Accenture European Business Summit Survey 2013c Top ten actions mentioned to boost technology innovation

Key Findings

Key Enablers to Growth: Talent and Financing

Key Findings

28

Rebuilding SkillsPositioning the issue

While many things contribute to and help shape a company’s performance, a company’s skill level and talent ultimately can spell the difference between market leadership and irrelevance.

The survey conducted last year for the European Business Summit focused on the labour challenges facing European businesses. Seventy-two percent of decision makers participating in the European Business Summit Survey 20126 believed Europe needed to increase investment in education and skills development. Yet paradoxically, because of the weak economic conditions, 86 percent said they had either reduced or frozen their levels of investment in skills development and training. Perhaps not surprisingly, four in 10 respondents said they were experiencing at least a moderate shortage of required skills – a situation that could compromise their company’s ability to grow.

Two enablers will be especially key to Europe’s ability to capitalise on the three waves of growth opportunities: the workforce and finance.


72%of decision makers participating in Accenture European Business Summit survey 2012 believed Europe needed to increase investment in education and skills development.

29Key Findings


The European Business Summit Survey conducted in 2013 confirms companies continue to experience workforce challenges. The prevailing opinion, cited by 53 percent of executives this year, is that the workforce in general is not currently a competitive advantage for European industry (Figure 20). As expected, that perspective varies by country. The workforce is most likely to be seen as a competitive advantage by those in Germany (66 percent) and Italy (52 percent), less so by those in France (46 percent) and the United Kingdom (45 percent), and least likely by those in Spain (22 percent).


When asked to name the three actions that would be most important to improving the competitive advantage of the European workforce for European industry, executives cited a wide variety of potential steps (Figure 21). The step most commonly cited, named by 47 percent, is public and private investment in education and training for ‘jobs of the future’ in the industry. Improvement in language skills to develop mobility across Europe, use of technology to enable lifelong learning, increase of science/technology/engineering and maths (STEM) graduates, and improvement of apprenticeship were also very popular topics among executives.

Somewhat less frequently cited were improving workers’ language skills to enhance their mobility across Europe; using technology to enable lifelong learning and development of skills; increasing the number of graduates in science/technology/engineering and maths; and improving apprenticeship opportunities.

There is no single ‘silver bullet’ that will solve European industry’s workforce challenges. Business and government leaders must take a tailored approach to developing solutions that are most appropriate for and relevant to each country’s situation.

Reinvigorating financingPositioning the issue

To unlock Europe’s growth potential, companies also must invest in the business. Yet currently, companies across Europe have slashed investment and are holding on to large sums of cash that otherwise could be put to work to boost the economy. For instance, the amount of cash on hand at companies across the euro zone is estimated at more than €2 trillion, even as the ratio of investment to GDP in Europe has reached a 60-year low.7

Why are European companies so reluctant to invest in the European economy? Survey participants were divided on the reason (Figure 22). Thirty-seven percent said lack of profitability was the main obstacle, while the same percentage cited uncertainty of demand. Twenty-two percent believe the main challenge to investment is that companies prefer to keep cash on the balance sheet.

Lack of profitability is regarded as the main reason by respondents in France and Italy, while uncertainty of demand was most frequently named by those in Spain, Germany, and the United Kingdom. UK respondents also more frequently cited the preference for keeping cash on hand as a key reason.

Another factor thought to be impeding industry investment is the state of the EU banking system and the restoration of confidence that the planned new EU financial regulation may bring to the EU economy. On 1 January 2013, the European Commission unveiled a project of new financial regulation.8 Yet a majority of respondents in the survey (56 percent) are still not confident that this new regulation will efficiently support the financing of corporate investment in Europe – a perspective most common among respondents in Spain and Germany and least prevalent among those in the United Kingdom (Figure 23). Indeed, the latest available data highlights the credit crunch that is still impeding the recovery in the euro area (Figure 24).


To help further encourage investment, executives cited a number of additional avenues policy makers should consider that could improve the availability of financing for European companies (Figure 25). Enabling better access to capital markets and greater venture capital funding for startups were the most commonly cited as ranked among the three most important actions. Other policy requirements include public financing for small and medium-size businesses, more conducive payment terms, and extending credit risk financing for exports to emerging markets. Approximately three in 10 favoured supporting microfinance and developing equity financing. Crowdfunding was cited as one of the top-three actions by nearly one out of five respondents.

31

Figure 20: Do you consider that the workforce is currently a competitive advantage for European industry? (%)�a,�b

0

20

40

60

80

100

0

20

40

60

80

100

53

47

34

66

42

58

48

52

54

46

55

45

78

22

France SpainGermanyOverall Other UKItaly

Yes

No

Figure 21: What priority actions should be taken to improve the competitive advantage of the European workforce for European industry? (%)�a,�b

Public and private investment in education and training for ‘jobs of the future’ in the industry 47

Improvement in language skills to improve mobility across Europe 40

Use technology to enable lifelong learning and the development of skills 39

Increase Science/Technology/Engineering and Maths graduates 34

Improve apprenticeship 33

Better mutual recognition of qualifications across Europe 29

Use technology to set up a Europe-wide ‘labour exchange’ or ‘job shop’ 23

Simplification of work visa rules for non-EU skilled workers 19

Improve synergies between national employment agencies in Europe 19

A widening of the labour pool (e.g. extension of the retirement age, 17increasing female participation rate)


Lack of profitability 37

Uncertainty of demand 37

Preference to keep cash on balance sheet 22

Other 4

Figure 22: What is the main financing challenge that prevents European industry to invest in Europe? (%)�a,�b

Figure 23: How confident are you that the new EU financial regulation will efficiently support financing of corporate investment in Europe? (%)�a,�b

56%

0

20

40

60

80

100

53

42

3

2

Optimistic

Pessimistic

Very pessimistic

Very optimistic

a Base: All respondentsb Source: Accenture European Business Summit survey 2013

Key Findings


Given its current state of performance, European industry – and Europe at large – can no longer afford to have cash sitting on the sidelines. Smart policy decisions and targeted yet significant business investments are needed to unleash this cash to boost demand, increase output, and create jobs countries desperately need.

Figure�25:�What should policy makers act on to improve the availability of finance for European industry?�(%)�a,�b

Better access to capital markets 54

Greater venture capital funding for start up 48

New public funding for SMEs 40

More conducive payment terms 39

Extending credit risk financing for exports to Emerging Markets 37

Support micofinance 32

Develop equity financing 31

Support the use of crowd funding 19


56%are pessimistic the new EU financial regulation will efficiently support financing of corporate investment in Europe.

47%consider the workforce is currently a competitive advantage for European industry.


Figure 24:�EU Bank credit to firms (annual rate of growth) (%)

Source: Accenture Research based on ECB, latest observation February 2013

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

EU bank credit to firmsAnnual rate of growth

Euro area

2010 Jan 2011 Jan 2012 Jan 2013 Feb

European Business Summit 2013: research study 33

There is no question that European industry is suffering in 2013. Manufacturing output is declining once again and unemployment continues to rise, signalling “a slow, grinding contraction, with few signs of stabilisation.”9

However, as the European Business Summit Survey 2013 revealed, executives are optimistic there are answers to Europe’s challenges. Half of the executives polled believe Europe’s economic crisis has inflicted only temporary damage on European industry and that Europe will swiftly recapture its previous levels of competitiveness, and nearly two-thirds are confident Europe’s industrial sector remains competitive internationally.

As executives and policy makers seek to reverse course and restore Europe’s industrial competitiveness, European businesses should look for ways to capitalise on the three waves of growth opportunities that are rippling across the global economy: changing consumer behaviour, energy cost and energy challenges, and technology innovation and advanced manufacturing.

Key to capitalising on those opportunities are two important enablers: the workforce and finance. Businesses and governments must take action to help companies not only develop and strengthen the skills that are critical to competitive advantage, but also address shortcomings in current financial regulations to unleash business investment in growth-generating initiatives.

Finally, it is critical to recognise the diversity of the European economies and tailor these responses to the unique conditions and needs of individual countries. One-size-fits-all approaches to the challenges Europe faces likely will not only fail to improve the performance of Europe overall, but could also prolong Europe’s slump and threaten to widen the competitive gap between the industries of Europe and other regions such as China, Brazil, and the United States.

The Final Word

Working�together,�business�and�governments�can�devise�the�right�combination�of�approaches�and�policies�to�address�the�challenges�European�industry�faces,�and�get�the�engine�of�the�European�economy�running�productively�once�again.

The Final Word 33


Appendix: Survey Results

Which of the following best describes your view? (%)

The worst of the European economic crisis is over and the European economy will start to recover well in the next three years.

39 38 57 31 35 35 44

The European economic crisis will continue and Europe will struggle to recover well in the next three years.

61 62 43 69 65 65 56

Total 100 100 100 100 100 100 100

How important is industry for European economic growth?

Not important at all 0 0 0 2 0 0 2

Not very important 3 4 4 6 1 0 3

Important 42 53 42 34 26 46 50

Critical 55 43 54 58 73 54 45

How important is industry for innovation in Europe?



Important 38 27 43 44 20 42 56

Critical 59 68 53 54 78 57 36

How important is industry for overall European competitiveness?

Not very important 4 8 6 2 2 1 11Important 47 50 52 43 32 49 55Critical 49 42 42 55 66 50 34

How would you assess Europe’s international industrial competitiveness?

Competitive 64 56 90 58 49 59 80

Not competitive 36 44 10 42 51 41 20

What are the key disruptors for European industry, i.e. have the potential greatest impact on European industry? Mentioned in top three

Move to a low carbon economy (e.g., low carbon energy, energy efficiency, etc.)

60 62 73 62 52 57 59

Development of advanced manufacturing (e.g., 3D printing, biotechnology)

53 67 25 63 41 59 64

Changing patterns of consumption (e.g., aging, new consumers' behaviours, etc.)

71 66 76 60 80 71 70

Improvement of Trans-European networks (physical and digital infrastructures)

47 41 54 55 45 41 55

Rapid growth of emerging markets (e.g., BRIC etc.) 68 65 71 60 82 72 52

Total France Germany Italy Spain UK Other countries

Col % Col % Col % Col % Col % Col % Col %

35Appendix: Survey Results

What are the most important long term barriers to Europe’s international industrial competitiveness? Mentioned in top three

High levels of corporate taxation 32 43 28 31 32 26 34

Europe's labour regulations and social employment costs 61 61 34 43 35 40 44

Poor levels of educational attainment 6 6 20 9 27 14 16

Red tape and complex rules of the Single Market 42 42 59 40 44 55 41

Fragmentation of European internal market 28 28 25 20 28 16 22

High cost of energy in Europe 9 9 49 34 34 38 36

Lack of a risk taking financial services sector (including venture capital)

30 30 18 25 14 24 13

Lack of support for small, start-up enterprises 20 20 13 32 27 23 25

Insufficient Trans-European networks (physical and digital infrastructures)

5 5 10 22 6 15 14

Insufficient support for R&D and technology innovation 39 39 24 25 46 27 28

Are you aware of the following EU initiatives related to growth and competitiveness: The Lisbon Agenda (2000-2010)?

You are aware of it and know the objectives & content 23 20 32 26 25 14 27

You are aware of it but do not really know the objectives & content 50 51 47 43 45 51 65

You are not aware of it 27 29 21 31 30 35 8

Are you aware of the following EU initiatives related to growth and competitiveness: EU2020 (2010-2020)?




Are you aware of the following EU initiatives related to growth and competitivenes: Communication on Industrial Policy (2012)?




How confident are you that the European policies will achieve the objective of increasing the share of industry to 20% of GDP?

Very optimistic 2 2 3 1 5 0 3

Optimistic 45 27 62 51 41 36 69

Pessimistic 48 63 31 40 49 61 27

Very pessimistic 5 8 4 8 5 3 1

Do you think Europe must increase its industrial output from around 16% to 20% of GDP by 2020 in order to achieve overall long term economic competitiveness?

Yes 82 81 80 77 89 82 78

No 18 19 20 23 11 18 22




How confident are you that European industry will be cost-competitive from an energy point of view compared to other main geographies like the US, China or Russia, in three years’ time?


Optimistic 39 30 48 46 40 30 53

Pessimistic 52 61 43 48 54 60 35


How important is it for Europe to decrease its current dependency on non-European energy supply to allow for industrial growth?

Critical 41 38 25 48 72 38 20

Important 50 49 60 46 23 54 75



What priority actions should be taken to address the energy challenges in Europe? Mentioned in top three

Improve energy efficiency 68 77 75 60 81 69 39

Support investment in renewable 63 59 66 75 75 50 59

Support and invest in clean coal 17 8 19 20 14 19 22

Support investment in shale gas 23 30 14 14 13 28 34

Support and invest in nuclear generation capacity 36 29 23 18 42 52 33

Complete the Single Market in energy 33 41 52 31 19 22 42

Negotiate to improve energy supplies from outside the EU 23 15 23 26 22 22 31

Support and invest in Smart Grids 38 39 29 55 32 37 39

How important will new technology innovation be for the future competitiveness of European industry?

Important 41 34 48 50 22 41 59



Do you think Europe will be ahead of or behind China in ten years in terms of its technology innovation?

Ahead of China 29 31 41 23 41 21 19

Behind China 55 46 41 65 46 67 64

Level with China 16 23 18 12 13 12 17




37

What priority actions should be taken to boost technology innovation within European industry? Mentioned in top three

Invest in European digital infrastructure (broadband for all) 16 10 16 23 14 17 20

Improve the deployment of current European initiatives 16 18 22 20 7 12 22

Invest more public funds in R&D and technology 33 25 39 31 45 31 27

Increase Science/Technology/Engineering and Maths graduates 21 16 25 18 8 28 25

Encourage education/industry collaboration 29 27 42 23 32 31 17

Make public procurement more open to small innovative enterprises 18 25 16 20 12 14 28

Support the development of Innovation Clusters (i.e. similar to Silicon Valley)

29 38 25 18 39 24 28

Create conditions for financial industry to back innovation 31 33 13 25 40 42 25

Reduce taxation levels for R&D/capital investment 34 30 19 35 45 42 27

Improve support for small businesses and startup enterprises 30 42 34 37 24 25 23

Do you consider that the workforce is currently a competitive advantage for the European industry?

Yes 47 46 66 52 22 45 58

No 53 54 34 48 78 55 42

What priority actions should be taken to improve the competitive advantage of the European workforce for European industry? Mentioned in top three

Use technology to set up a Europe-wide ‘labour exchange’ or ‘job shop’ 23 14 18 32 31 19 27

Public and private investment in education and training for ‘jobs of the future’ in the industry

47 52 39 42 55 54 31

Improve apprenticeship 33 34 24 23 24 50 27

Improve synergies between national employment agencies in Europe 19 16 18 15 25 14 30

Use technology to enable lifelong learning and the development of skills

39 49 35 46 46 33 25

Improvement in language skills to improve mobility across Europe 40 57 46 32 42 31 36

Better mutual recognition of qualifications across Europe 29 22 43 42 15 21 42

Simplification of work visa rules for non-EU skilled workers 19 14 23 15 21 14 31

A widening of the labour pool (e.g. extension of the retirement age, increasing female participation rates)

17 20 15 20 11 17 22

Increase Science/Technology/Engineering and Maths graduates 34 20 39 32 29 46 28

Do you think that European industry is ready to address the consumer behaviour changes in Europe (e.g., stagnation of purchasing power, aging etc.)?

Yes 55 51 84 49 44 43 69

No 45 49 16 51 56 57 31





Do you think that European industry is ready to address the consumer behaviour changes in Emerging markets (e.g., rise of new middle class…)?

Yes 60 61 70 55 64 54 62

No 40 39 30 45 36 46 38

What is the main financing challenge that prevents European industry to invest in Europe?

Lack of profitability 37 56 36 43 26 26 45

Preference to keep cash on balance sheet 22 14 20 20 20 32 17

Uncertainty of demand 37 24 43 35 49 37 35

Other 4 6 1 2 5 5 3

How confident are you that the new EU financial regulation will efficiently support financing of corporate investment in Europe?


Optimistic 42 37 49 35 50 32 56

Pessimistic 53 61 46 58 47 62 39


What should policy makers act on to improve the availability of finance for European industry? Mentioned in Top three

New public financing for SME 40 42 27 34 41 39 58

Better access to capital markets 54 39 56 48 60 66 44

More conducive payment terms 39 33 42 58 31 31 48

Greater venture capital funding for start ups 48 46 53 42 47 57 33

Extending credit risk financing for exports to Emerging Markets

37 51 29 32 44 38 25

Support microfinance 32 30 25 46 36 28 31

Support the use of crowdfunding 19 22 19 20 20 15 22

Develop equity financing 31 37 49 20 20 25 39




European Business Summit 2013: research study 39

Acknowledgements

This reportiv and the research on which it is based would not have been possible without the generous participation of many people.

Core project teamFrancis Hintermann, Edvina Kapllani, Charlotte Raut, and Christine Yiannakis from Accenture Research.

Also from Accenture we would like to recognise the significant contributions of Matthew McGuinness, Patrick Oliver, Mark Purdy, Matthew Robinson, Mark Spelman and Barbara Wynne.

Queries relating to this report should be directed to [email protected], [email protected], or [email protected].

Additional thanks

From BUSINESSEUROPE, we would like to acknowledge the support and contributions of Jürgen Habenbacher and Adrian Van Den Hoven.

From the Federation of Enterprises in Belgium, we would like to acknowledge the support and contributions of Pieter Timmermans.

From the European Business Summit, we would like to acknowledge the support and contributions from Arnaud Thysen and Julia Ridsdale-Saw.

We also wish to thank the 510 leaders who completed the survey.

References

1 ‘Energising Global Growth: Understanding the Changing Consumer’, Accenture research report, 2013

2 Taken from ‘A Stronger European Industry for Growth and Economic Recovery’ presentation given by the European Commission at a press conference on 10 October 2012, http://ec.europa.eu/enterprise/policies/industrial-competitiveness/industrial-policy/files/20121010_industria_policy_vp_tajani_en.pdf



5 Accenture Technology Vision, 2013

6 ‘Turning the Tide: How Europe can rebuild skills and generate growth’, Accenture European Business Summit Survey 2012

7 ‘Firms’ Cash Hoarding Stunts Europe’, Stephen Fidler, The Wall Street Journal, 22 March 2012, http://online.wsj.com/article/SB10001424052702304724404577297610717362138.html

8 From the European Commission website, http://ec.europa.eu/budget/biblio/documents/regulations/regulations_en.cfm

9 ‘New Signs Point to Deeper Europe Malaise’, Brian Blackstone and Alex Brittain, The Wall Street Journal, 2 April 2013, http://online.wsj.com/article/SB10001424127887323296504578398090254171184.html

iv This report is an initiative of BUSINESSEUROPE and the Federation of Enterprises in Belgium, which has been carried out by Accenture on their behalf. The actions and recommendations included in the report represent the views of the survey respondents, BUSINESSEUROPE and the Federation of Enterprises in Belgium.

About the European Business Summit

The European Business Summit (EBS) is Europe’s key meeting place for business leaders, diplomats, the public sector, politicians and EU policy makers. This annual event provides a platform for high-level debate on the optimal conditions for business development in Europe, which in turn contributes to policy formulation. In addition, the EBS offers dynamic networking opportunities through private hosted events, board meetings, and one-to-one sessions in the Networking Village. Now in its 11th year, the Summit attracts 1,500 participants from over 60 countries, and 200 journalists. The European Business Summit is an initiative of BUSINESSEUROPE and the Federation of Enterprises in Belgium.

About BUSINESSEUROPE

BUSINESSEUROPE plays a crucial role in Europe as the main horizontal business organisation at EU level. Through its 41 member federations, BUSINESSEUROPE represents small, medium and large companies from 35 countries. Its main task is to ensure that companies’ interests are represented and defended vis-à-vis the European institutions with the principal aim of preserving and strengthening corporate competitiveness. BUSINESSEUROPE is active in the European social dialogue to promote the smooth functioning of labour markets.

About the Federation of Enterprises in Belgium

The Federation of Enterprises in Belgium (FEB) is the only multisector employers’ organisation representing companies in all three regions of Belgium. Its members, Belgium’s leading sectoral federations, represent companies in key industrial and service sectors. FEB has 50 full members, all of which are professional sectoral federations, as well as a number of applicant and corresponding members. All in all, it represents more than 50,000 businesses, of which 41,000 are small or medium-sized enterprises. FEB represents more than 80 percent of the workforce in the private sector. FEB represents companies in nearly 150 national, European and international bodies.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 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.

About Accenture Research

Accenture Research is Accenture’s global organisation devoted to economic and strategic studies. The staff consists of over 160 professionals in economics, sociology and survey research from Accenture’s principal offices in North America, Europe and Asia/Pacific.

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