IHK Business Barometer: Perceived Decline in EU Competitiveness Among 3,000 German Businesses

For the IHK Business Barometer for the 2024 European Parliament elections, the Chambers of Industry and Commerce (IHKs) collected responses from around 3,000 businesses across all sectors and regions. The results indicate that Germany’s entrepreneurs perceive the competitiveness of the European economy to be at risk. They stress the urgent need to strengthen it after the European Parliament elections.

A broad majority of companies then describe important achievements of the EU as tangible benefits for their businesses. These include factors such as political stability (82 percent), a common stable currency (76 percent), unified EU norms and standards (68 percent), access to European markets (66 percent), reduced distortions of competition (64 percent), and recruitment of skilled workers from other EU member states (61 percent).

However, it is alarming that two-thirds of German industrial companies have seen the attractiveness of the EU as a business location decline over the past five years. Only 5 percent perceive improved conditions. Across all sectors, 56 percent feel a decreased attractiveness, while 7 percent perceive an increased one.

“Despite the fundamentally good starting position, Europe is at risk of losing ground in international competition. This trend must be promptly reversed,” says Martin Wansleben, CEO of the German Chambers of Commerce and Industry (DIHK). “Especially with the excessively bureaucratic Green Deal, the EU needs to take stock: bureaucracy must be reduced rather than increased, so that businesses have more resources for a climate-friendly transformation of their business activities. Only then can Europe become an attractive location for companies again.”

Top issues: Bureaucracy, Energy, Cybersecurity

Sibylle Thierer, Vice President and representative of DIHK in the European Chamber of Commerce umbrella organization Eurochambres, also sees urgent need for action, especially regarding bureaucracy – just like 95 percent of the surveyed companies. “Many businesses have experienced true bureaucratic monsters in recent years,” says Thierer. “The regulatory thicket is getting denser – from the General Data Protection Regulation to numerous new reporting obligations to the Supply Chain Due Diligence Act. Added to this is the regulation of the Green Deal. All of this consumes time, money, and human resources. Instead of the promised reduction in bureaucracy, we are experiencing more and more regulations.”

The necessary initiatives must be consistently implemented in the next legislative period so that the relief for businesses would be felt promptly and tangibly. Particularly, complex approval and licensing procedures as well as detailed documentation requirements have a particularly negative impact on competitiveness.

As the second focus of the upcoming EU policy, more than two-thirds of the survey participants (68 percent) hope for a secure and affordable energy supply. In energy-intensive industries, it is even 76 percent. “We painfully learned that an affordable and secure energy supply is not a given,” says Thierer. “But it is fundamental for businesses and thus also for jobs in Europe.”

Additionally, companies emphasize that effective protection against cyberattacks is becoming increasingly important. For 52 percent, preventing digital attacks should be another priority for the EU. Eurochambres Vice President Thierer is convinced: “Only through good cooperation between the EU and the business sector can the fight against cybercrime succeed. In particular, small and medium-sized enterprises must be better able to protect themselves against these attacks.”

Test of endurance of the European location

“Overall, the EU must refocus on its core tasks: strengthening economic competitiveness,” demands DIHK CEO Martin Wansleben. “The EU Commission has some homework to do here, for example, also regarding free trade agreements. The Mercosur agreement should be concluded as soon as possible. Further delay will adversely affect European competitiveness.” In addition, innovation, technological progress, widespread use of digitization, and artificial intelligence could strengthen the location.

“We must make Europe attractive again for businesses as well as the best professionals and executives,” says Wansleben, citing the key areas for the upcoming legislative period: less bureaucracy, better international integration, more innovation, lower energy costs, faster procedures, and more skilled workers. “We need to address these issues immediately to make the economy strong in Europe again.”