Europe on way to recovery, say leading industrialists

The heads of Europe’s biggest industrial companies have declared the bloc is on its way to recovery, showing a sharp rebound in confidence in prospects for their businesses and the economy over the next six months.

While cautioning that recovery was still fragile as a second wave of the pandemic sweeps the region, Europe’s leading industrialists said they had seen a large improvement in business conditions — even before news of successful vaccine trials broke last week, according to a twice yearly survey of members of the European Round Table for Industry.

The poll, which surveyed the chairs and chief executives of 55 companies with combined revenues of €2tn, found that a measure of their confidence had jumped from 34 out of 100 in May to 61 at the end of October. A score above 50 reflects more positive than negative responses.

At the same time, industrialists are preparing to kickstart investment in Europe, with the score rising from 35 to 54. Even more expect to increase investment outside Europe, with the score rising from 32 to 59.

Not everyone will share in the recovery, however, with 51 per cent of the industrialists signalling their expectations that employment will decline in Europe, according to the Conference Board Measure of chief executive confidence in Europe. This will be grim news for those who took heart from recent Eurostat data that showed employment in the bloc rose by 1 per cent in the third quarter, perhaps helped by generous government support schemes.

Moreover, the vast majority of industrial leaders — 81 per cent — said they intended to cut their office space by up to 25 per cent, with the balance planning even bigger reductions.

Siemens told the Financial Times it was planning permanent changes to allow employees to work away from the office for two to three days a week.

Carl-Henric Svanberg, chair of ERT and chairman of truckmaker Volvo Group, told the Financial Times that there was still a high risk that the recovery could be derailed.

“There is still a lot of fragility in the European economy — much of which can affect smaller companies that large industrials rely on in the supply chains,” he said.

Frans van Houten, chief executive of health technology group Royal Philips, also warned that “ongoing geopolitical tensions” — such as those between the US and China — and falling employment could hinder recovery.

Several of the industrialists stressed that while confidence would continue to grow along with hopes of a successful vaccine, there remained significant challenges. 

European industry would have to remain competitive not only as it recovered from the impact of the virus but also as it dealt with the twin challenges of climate change and digitalisation. 

The survey showed that 79 per cent of those who responded had no plans to reshore supply chains, despite the vulnerabilities exposed by the pandemic, when some factories were forced to shut for lack of components. 

Martin Brudermüller, chairman of chemicals group BASF and head of the ERT competitiveness committee, said it was telling that European companies expected to invest more outside the bloc than within. “Europe’s economies have been heavily impacted by Covid-19 but are on a recovery now month by month,” he said. “The further recovery will strongly depend on how the various ambitions addressed by the EU Green Deal are translated into workable . . . conditions that ensure the international competitiveness of industry.”

The European poll echoes findings from a similar survey of leading US executives, said Dana Peterson, chief economist of The Conference Board. “Executives on both sides of the Atlantic are looking forward to sustained recovery in business conditions that will support — and be bolstered by — rising capital investment in 2021,” Ms Peterson said. “Recent promising news from vaccine trials is likely to further boost optimism that the end of the pandemic is in sight.”

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