EIB Investment Survey 2024: European Union overview

Businesses have weathered recent shocks, such as the energy crisis, relatively well. But tougher economic conditions are starting to weigh on firms’ willingness to invest.

• The share of firms expecting to increase rather than decrease investment halved in 2024, falling to a net balance of 7%, from 14% in 2023.

The outlook for the future is mixed. On balance, EU firms are negative about the political and regulatory environment and the overall economic climate, with more firms expecting the situation to deteriorate than improve in the next 12 months. EU firms see mild improvements – in net terms – in business prospects within their sectors and in their ability to finance investments internally, although these improvements are less visible than in the United States. Access to finance also remains a concern.

On a positive note, many European businesses are satisfied with their level of investment over the past three years and are committed to tackling climate change and embracing digital technologies.

Many EU firms are satisfied with their overall level of investment over the last three years, but a significant share still feel they are not investing enough (14%). Much of EU firms’ investment is focused on replacing rather than expanding their capacity.

• The share of EU firms investing in expansion is 6 percentage points below the share of US firms (26% in the European Union vs. 32% in the United States).
• EU firms devote 37% of their investments to intangible assets, focusing less on land, buildings, and infrastructure than US firms do (14% of EU firms vs. 24% of US firms).

Looking ahead, EU firms expect to continue investment in replacing instead of expanding capacity. This contrasts sharply with US firms, where 47% see themselves expanding capacity in the next three years, compared to 26% in the European Union.

EU firms are highly dependent on trade, either with other EU members or with countries beyond the European Union. Political and trade tensions threaten to disrupt supply chains, although those risks dissipated somewhat in 2024. However, EU and US firms remain concerned about disruptions to their logistics and transport and their ability to comply with new regulations, standards and certifications.

In response to trade shocks, EU and US firms have adopted similar strategies: building up inventories, investing in digital tracking of supplies and diversifying suppliers. Despite the challenge, EU firms are less likely to reduce their reliance on international trade by cutting the amount of imported goods and services used in production.

• Only 7% of EU firms are willing to scale back imported goods and services used in production, vs. 14% of US firms.

EU firms continue to lead in climate change investments, whether to prepare for extreme weather or to reduce carbon emissions. EU firms are also less likely to see the green transition as a risk than their US counterparts.

• One in three EU firms (34%) say that the transition to stricter climate standards and regulations will pose a risk to their business over the next five years, compared to 42% of US firms.
• 27% of EU firms see the green transition as an opportunity.

Around 90% of EU and US firms have taken action to reduce greenhouse gas emissions, largely through waste minimisation, recycling and investments in energy efficiency. EU firms are more likely than US firms to have invested in or adopted sustainable transport and renewable energy generation or to have set targets for greenhouse gas emissions.

About 66% of EU firms say they are exposed to physical climate risks, compared with 60% of US firms. However, less than half of firms in the European Union or in the United States are taking concrete action to deal with those risks.

EU and US firms share concerns about the business environment, and say they have not seen any significant improvement in recent years. Firms in both regions mainly worry about the availability of staff with the right skills and uncertainty about the future.

• In the European Union, 46% of firms say that energy costs remain a major obstacle to investment.
• EU firms are also more likely to perceive business regulations and the availability of finance as major obstacles than their US counterparts.