Late final yr, amidst all the excellent news about COVID-19 vaccines, I had an illuminating dialog with the CEO of a European producer. me by my laptop computer display throughout a video chat, he remarked that he was stuffed with hope for 2021, whereas on the similar time having some anxieties concerning the highway forward: would Europe lag Asia and North America? What had been the implications for his firm’s technique and useful resource allocation selections? Is there a future for Europe and, if that’s the case, what are its foundations?
As chairman of PwC Europe, I’m nicely conscious of the tide of negativity that has swept our continent, elements of which have been very badly hit by the virus, all of which has been depressed over the past couple of years by the seemingly intractable Brexit negotiations and different wrangling by governments. Nonetheless, I additionally see many brilliant spots on the panorama, and key strengths and aggressive benefits on which the EU can construct.
Clearly, development might be uneven because the world bounces again from the pandemic. Based mostly on the forecasts of 180 analysis institutes and different educational organisations, European Union GDP is prone to have shrunk by round 9.1% in 2020, and can develop by 5.5% and 1.2%, respectively, in 2021 and 2022. Inside these numbers, although, there might be sharp variations amongst nations within the area, and amongst enterprise sectors.
Europe must be sensible. We clearly lack large platform firms in expertise like Alibaba, Amazon, Fb, Google and Tencent, and having these will allow different areas, notably the US and China, to speed up their recoveries. To catch up, we’ll want distinctive entrepreneurs, a extra supportive regulatory setting, and a tradition that prizes the alternatives on this area as a lot as particular person privateness and the safety of information.
There are challenges in banking and monetary providers. Granted, because of elevated capital necessities, the sector is extra resilient than it was in 2008 and has offered the actual financial system with a lot wanted liquidity within the wake of the most recent disaster. Most gamers are striving to implement their digitisation agenda and to chop prices and consolidate inside nationwide borders, whereas the expansion of fintechs and the incursions of huge tech firms have injected new competitors.
However, structural weaknesses stay. Too usually, the authorities have sought to mitigate danger by lowering the dimensions of banks fairly than encouraging cross-border consolidation and selling cross-border champions. European banks, in the meantime, have fallen additional behind their US and Asian opponents when it comes to market capitalisation and steadiness sheet dimension. Strain on earnings and capital ratios are set to accentuate this yr as authorities ensures on loans to assist struggling firms expire, defaults rise and the necessity for refinancing turns into obvious. The creation of a continent-wide European capital market to compete with the US, the UK and Asia is extra pressing than ever.
This stated, there may be a lot to brighten the gloom. Innovation is in our European DNA, and we want look no additional for inspiration than the good scientists at Germany’s BioNTech who in partnership with Pfizer developed the primary accredited vaccine towards COVID-19 based mostly on BioNTech’s proprietary mRNA expertise. European lecturers and commentators have been fast to see a correlation between enterprise success on the one hand and variety and inclusivity on the opposite, so it’s noteworthy for my part that the husband-and-wife crew who co-founded the corporate that enables new vaccine candidates to be developed extra rapidly than standard ones are first- and second-generation immigrants from Turkey.