The European Union's industrial competitiveness continues to weaken, as it loses ground to China and the US in several areas including deployment of infrastructure and innovation, according to new research.
In February 2024, 73 business across 17 sectors signed the Antwerp Declaration for a European Industrial Deal - calling for a European industrial deal to complement the EU Green Deal and safeguard quality jobs in Europe. They warned that Europe’s industries were facing the worst economic downturn in a decade at a period when investments were needed to achieve Europe’s transition to climate neutrality. Today over 1,300 organisations spanning 25 sectors have joined in support, and now the grouping is warning that the situation is worse than a year ago - and that the next five years will be the most challenging for Europe’s industry in many decades.
The Antwerp Declaration Monitoring Report, which looks at key performance indicators based on the Antwerp Declaration, shows that for 83% of the KPIs monitored, there has been no improvement and even a deterioration since the declaration was signed in 2024.
"Deindustrialisation is accelerating and companies are relocating their activities to lower cost regions," says the report commissioned by European chemical industry body Cefic and prepared by Deloitte. The report notes that the chemicals in particular has been hit hard, with some 20,000 jobs lost in the sector in recent years due to plant closures. The report reveals the 'stark decline' in the European Union's industrial competitiveness, Deloitte said.
The report said that energy remains “a critical pain point,’ for the EU’s industrial companies. However, deployment of infrastructure, which is not keeping pace with industrial needs, is proving to be another stumbling block. Unlocking the potential for renewables, which is a central part of the industrial green transition and has the potential to lower energy costs as well as supporting electrification for industrial end users, requires a highly interconnected grid and well-functioning flexible market, but the report says: “Despite increased investment, long grid connection queues with waiting times of 7 to 10 years are a clear bottleneck for electrification.”
The EU also falls short on its targets for the storage of carbon dioxide with only 0.6Mtpa of operational storage capacity currently available. The EU has a target of 50Mtpa of storage by 2030. “2026 is a crucial year for the Carbon Capture and Storage (CCS) value chain, with multiple Belgian flagship projects requiring sufficient business case de-risking to take a final investment decision,” the report says.
Innovation in the EU is also of concern, with the bloc's ‘innovation performance’ 15 percentage points lower than that of the US. In addition, China “now dominates the patent landscape, filing 17 times more applications than the EU,” the findings reveal.
“The EU’s innovation ecosystem is hampered by a higher risk premium on equity investments, making it less attractive. Venture capital funding in the EU also remains far behind the more mature US market, which offers a more risk-tolerant enterprise culture,” the report adds.
Deloitte’s analysis also shows that funding for the industrial transition is a major challenge, noting: “The funding architecture remains complex and fragmented, with an uneven distribution of support across member states, placing the EU at a disadvantage compared to the large-scale simpler instruments seen in the US and China.”
Deloitte said the analysis shows the EU holds a clear competitive advantage in only three of 22 internationally benchmarked areas: biomass usage for biomaterials & bioenergy, circular material use, and regulatory sandboxes. "These few strengths are insufficient to restore the EU’s overall competitive position, leading to a deindustrialisation of its open economy," it said.
Markus Kamieth, president of Cefic and CEO of BASF said: “Europe is losing industrial capacity at a speed we have never seen before. This not a temporary downturn – it is structural competitiveness shift affecting all manufacturing sectors. If Europe wants to lead the clean transition it must stop losing the industries that make that transition possible. We are not asking for protection from change; we asking for competitive conditions to lead the change – and to safeguard high quality jobs for European workers.”
Signatories to the declaration have called for ‘bold action’ in three key areas. These being: a reduction in energy and carbon costs; fair global trade and improved access to finance; and improved public procurement for products made in the EU.
Further reading:
- Europe's chemicals industry is in a worrying situation
- Industry at risk from lack of resilience warns report
- Scientific papers, patents and VC deals: The world's top innovation locations revealed
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