November 29, 2017
Guest post by Arnaldo Abruzzini, CEO of EUROCHAMBRES, the Association of European Chambers of Commerce and Industry.
European business prospects for 2018 are bright, but concerns about the lack of skilled workers are rising. This summarises the main findings of the EUROCHAMBRES Economic Survey 2018 (EES2018), a study based on feedback from more than 50.000 businesses from 23 European countries.
This is the 25th edition of an unparalleled exercise in Europe, since no other report analyses the expectations of such a large sample of companies across the continent. Businesses respond to a series of questions about how they expect to perform in the year ahead in terms of domestic and export sales, investment and employment. Their general business confidence is also gauged and they are asked about the main challenges that anticipate.
EES2018 reveals that business confidence grows again after a drop last year. The effects of the economic crisis are becoming less noticeable after almost a decade, as financing conditions have progressively improved while domestic demand continues to grow across Europe. Meanwhile, geopolitical turbulence seems to have become the new normal as businesses adapt to ever changing situations within the EU and with other key trading partners.
However, the skills mismatch risks being a bottleneck to business growth and to a further economic upturn. Even though European firms are open to hire more workers, they struggle to find the people with the right skills and competences. When it comes to the growing number of young European graduates, it is clearly not just a matter of quantity, but increasingly of whether they offer what businesses need.
EU policy-makers must address youth employability by fostering vocational and educational training with a strong work-based learning component. They must also do more to facilitate the mobility of workers across the Union. The framework for quality apprenticeships and the EU Blue Card scheme are both steps in the right direction, but we also need a more integrated and business-oriented approach, especially on skills forecasting.
Most European businesses do not see Brexit among the main challenges for 2018. A notable exception to this is Ireland, where not only is there a significant decrease in export expectations and overall business confidence, but also the impact of Brexit is identified as the number one challenge. Of course, Brexit will not materialize until March 2019 at the earliest. It seems likely that it will feature more prominently in the next edition of the EES unless negotiators make tangible progress in agreeing not only on the terms of the UK’s departure, but also on the conditions for post-Brexit commercial and trading relations.
European businesses’ investments are also set to rise in 2018 according to the survey and financing conditions ranks only fifth among the challenges. The continuing low interest rates and the steady progress on the Capital Markets Union are certainly factors in this positive evolution.
Nonetheless, there remains considerable scope for further improvement with regards to the completion of the Capital Markets Union. SMEs are still too reliant on bank lending as a main source of finance. Policy-makers need to address the barriers for SMEs to the access to equity financing and venture capital, and the use of alternative ways of finance – such as crowdfunding, business angels or FinTech.
So overall, the European business community is positive about the year ahead, which is definitely encouraging. However, this must not serve an excuse to settle. Now more than ever, European institutions must accompany positive economic developments with sound policies that ensure a sustainable and business-friendly growth.