Transcript Increasing EU industries, challenges and opportunities

Increasing EU industries, challenges and
opportunities- focus on access to finance
James Watson, Director Economics
Brussels, 12 November2014
Outline
• Importance of manufacturing
• Access to finance situation
• BUSINESSEUROPE access to finance priorities
Industry as backbone of the economy
Direct and indirect employment in the manufacturing sector (2012) in 1000
Source: Eurostat (2013), WIOD (2013), calculations by IW
EU is losing global manufacturing share
Share of global manufacturing value-added
Source: UN (2013), OECD (2013), Eurostat (2013), calculations by IW
Manufacturing and Employment
well below pre-crisis levels
EU Manufacturing Output & Employment in 2000-2013 (2000 = 100)
120.0
115.0
Output
110.0
Employment
105.0
100.0
95.0
90.0
85.0
80.0
75.0
70.0
Recommendations for an industrial compact
Industrial competitiveness throughout all policy areas
ECONOMY
ENERGY AND
CLIMATE
SINGLE MARKET
EMPLOYMENT
ENTREPRENEUSHIP
TRADE
Bank loans to corporations have fallen
Euro Area bank loans to non financial corporations, July 2012 =
100
104
102
100
98
96
94
92
90
2008
2009
2010
2011
2012
Result of both demand and supply factors
2013
2014
Corporate bond issuance has risen
Bonds outstanding of euro area nonfinancial corporations,
July 2012 = 100
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
2008
2009
2010
2011
2012
2013
2014
Financial fragmentation has eased slightly
Standard deviation of bank lending rates to nonfinancial
corporations in Euro Area (ECB)
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2005
2006
2007
2008
2009
2010
2011
2012
Eg 3% Germany, Austria, 4% Portugal, > 5% Greece
2013
2014
5 Priorities for access to finance
•
•
•
•
•
Complete banking union
Right balance on prudential regulation
Attractive tax environment – no FTT
Use public funds to leverage private – EIB
Alternative financing routes
The EU continues to lag on Venture Capital
funding
Venture capital funding (%GDP), 2011 (most cases)
0.18
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
USA
UK
Canada
Germany
Spain
Italy
Japan
EU
France
But VC investors may be acting rationally...
Average US and UK fund performance
Source: Nesta, Unchaining Investment
Conclusion
• Access to finance problems damaging growth
and jobs
• Likely to become increasing constraints
• But investment and growth needs an attractive
business environment
• High policy uncertainty an issue
• High costs of doing business in EU – regulation,
energy, tax labour costs