Late final 12 months, amidst all the excellent news about COVID-19 vaccines, I had an illuminating dialog with the CEO of a European producer. me by means of my laptop computer display throughout a video chat, he remarked that he was full of hope for 2021, whereas on the identical 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 choices? 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. Nevertheless, I additionally see many brilliant spots on the panorama, and key strengths and aggressive benefits on which the EU can construct.
Clearly, development shall be uneven because the world bounces again from the pandemic. Based mostly on the forecasts of 180 analysis institutes and different tutorial 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 shall be sharp variations amongst international locations within the area, and amongst enterprise sectors.
Europe needs to be real looking. We clearly lack massive platform corporations in know-how 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 are going to want distinctive entrepreneurs, a extra supportive regulatory surroundings, and a tradition that prizes the alternatives on this house 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 supplied the actual economic 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 corporations have injected new competitors.
Nonetheless, structural weaknesses stay. Too typically, the authorities have sought to mitigate danger by lowering the dimensions of banks slightly 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 income and capital ratios are set to accentuate this 12 months as authorities ensures on loans to assist struggling corporations 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 mentioned, 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 sensible scientists at Germany’s BioNTech who in partnership with Pfizer developed the primary accepted vaccine in opposition to COVID-19 based mostly on BioNTech’s proprietary mRNA know-how. European teachers 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 in my opinion that the husband-and-wife group 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.