The heads of Europe’s largest industrial companies have said the bloc is on the way to recovery and showed a sharp surge in confidence in the prospects for their companies and the economy over the next six months.
Europe’s leading industrialists warned that the recovery was still fragile as a second wave of the pandemic hit the region, but said business conditions had improved significantly – even before news of successful vaccine trials broke last week, such a biannual survey of members of the European Round Table for Industry.
The survey, which asked chairmen and directors of 55 companies with total sales of EUR 2 billion, found that a measure of their trust had increased from 34 from 100 in May to 61 at the end of October. A value above 50 reflects more positive than negative answers.
At the same time, industrialists are preparing to stimulate investment in Europe. The value rises from 35 to 54. Even more expect an increase in investments outside Europe, with the value rising from 32 to 59.
The European economy remains very fragile – much of it may affect smaller companies that large industrial companies rely on in their supply chains
Not everyone will participate in the recovery, as 51 percent of industrialists signal their expectations that employment in Europe will fall, according to the Conference Board Measure of Business Leaders’ Confidence in Europe. This is grim news for those who have taken to heart the latest Eurostat data, which shows employment in the bloc rose 1 percent in the third quarter, possibly aided by generous government support programs.
Additionally, the vast majority of industry leaders – 81 percent – said they intend to reduce their office space by up to 25 percent, with balance sheet planning for even larger reductions.
Siemens told the Financial Times that permanent changes are planned so that employees can work outside the office two to three days a week.
Carl-Henric Svanberg, chairman of ERT and chairman of truck manufacturer Volvo Group, told the Financial Times that there was still a high risk of the recovery derailing.
“The European economy remains very fragile – much of it may affect smaller companies that large industrial companies rely on for supply chains,” he said.
Frans van Houten, managing director of health technology company Royal Philips, also warned that “persistent geopolitical tensions” – such as between the US and China – and falling employment levels could hamper recovery.
Some of the industrialists emphasized that while hoping for a successful vaccine would keep confidence growing, significant challenges still remain.
European industry would need to remain competitive not only because it has recovered from the effects of the virus, but also because it has dealt with the dual challenges of climate change and digitization.
The survey found that 79 percent of respondents had no plans to resupply supply chains when some factories had to close due to missing components, despite the security gaps caused by the pandemic.
Martin Brudermüller, chairman of the chemical company BASF and head of the ERT competition committee, said it was telling that European companies were investing more outside than inside the bloc. “Europe’s economies have been heavily impacted by Covid-19 but are now recovering month after month,” he said. “The further recovery will depend heavily on how the various ambitions of the EU Green Deal are turned into workable ones. . . Conditions that ensure the international competitiveness of the industry. “
The European survey mirrors the results of a similar survey of senior US executives, said Dana Peterson, chief economist on the conference board. “Executives on both sides of the Atlantic look forward to a sustained rebound in business conditions that will support and be supported by rising capital investment in 2021,” said Peterson. “The recent encouraging news from vaccine trials should further fuel optimism that the end of the pandemic is in sight.”