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 economyDirect 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

Recommendations for an industrial compact

ECONOMY ENERGY AND CLIMATE

SINGLE MARKET

EMPLOYMENT

ENTREPREN-EUSHIP

TRADE

Industrial competitiveness throughout all policy areas

Bank loans to corporations have fallen

Result of both demand and supply factors

Corporate bond issuance has risen

Financial fragmentation has eased slightly

Eg 3% Germany, Austria, 4% Portugal, > 5% Greece

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)

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