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Read a recent headline about Europe and chances are it will be negative. The global financial crisis hit the region hard. Unemployment is persistently high in countries such as Greece. Today, a migrant crisis is driving the largest movement of people across European borders since World War II.
The challenges are real, the focus on them understandable. But it would be short-sighted to overlook the facts: Europe remains a global economic powerhouse, open for business and set for growth.
For many multinationals Europe’s sheer size as a trading hub and consumer market means it is too big to ignore. The European Union (EU) is the world’s largest trading bloc, accounting for 16 per cent of global exports and imports. It has a combined population and GDP bigger than that of the US. It encompasses four of the world’s top 10 economies – Germany, the UK, France and Italy.
And European economies are growing. HSBC Global Research expects average GDP in countries that share the euro as a common currency to expand by 1.4 per cent in 2016. Growth is expected to be higher still in non-euro countries, including the UK and Poland.
Europe attracted USD289 billion of inward investment in 2014, compared with the USD146 billion invested into North America
As well as scale, Europe has a well-established and transparent regulatory environment. London, Frankfurt and Paris are trusted international financial centres with a long heritage. Countries such as Denmark, Sweden and Finland are ranked by the World Bank as being among the easiest places in the world to do business. Similar rules for product safety, consumer rights and intellectual property protection make it convenient to export into the region. A product approved for one EU country should be easy to sell to the 500 million consumers across the EU.
Some companies come to Europe to buy, rather than sell. European businesses include leaders in design, creative industries, legal services, technology and life sciences. The region has a strong record of supporting science and innovation: at the start of this decade, EU spending on research and development as a percentage of GDP was more than twice as high as China’s, and higher even than Japan’s. Strengths such as these helped Europe attract USD289 billion of inward investment in 2014, compared with the USD146 billion invested into North America.
Companies and sovereign funds from fast-growing economies are increasingly looking to buy European assets. Chinese organisations have made recent European acquisitions in sectors including consumer staples, financial services, pharmaceuticals and energy. Almost 60 per cent of overseas mergers and acquisitions completed by Chinese companies in 2015 targeted Europe.
None of this is to underplay the difficulties that Europe faces, from the migrant crisis to the economic struggles of countries on the edges of the eurozone. But though these challenges call for a response, they do not obscure the region’s fundamental strengths.
Meanwhile, European leaders have put forward a strategy for long-term competitiveness. They have committed to increase spending on research and development and nurture new technologies. They are encouraging investment in infrastructure, improving links to potential trade partners. New deals under negotiation, notably the proposed Transatlantic Trade and Investment Partnership with the US, could remove barriers, reduce costs and make international commerce easier still.
The countries of Europe have a long and rich history. They offer opportunities for the future, too. Businesses seeking international growth may find that Europe merits close attention.
