High energy prices and bureaucracy are forcing companies to relocate, a European Commission draft report has warned
The EU is losing its appeal for businesses, with many companies choosing to move to other locations, German news agency dpa reported on Saturday, citing a draft economic paper by the European Commission. The report notes that only four of the 50 largest technology companies in the world today are European.
“Europe’s attractiveness as a business location is declining,” relates the report, set to be officially released next week. It notes that between 2008 and 2021, nearly a third of the so-called unicorn start-ups founded in the EU relocated their headquarters abroad, largely to the US. Unicorns are privately-owned firms worth more than $1 billion, and are often technology-focused, grow very quickly, and attract a lot of investment. By setting new industry standards through technological advancements, they are believed to benefit economies on a macro level.
Some of the more prominent unicorns that were founded in Europe but later relocated their headquarters to the US are Swedish fintech Klarna, a Romanian-founded UiPath specializing in robotic processes, and Swedish music streaming service Spotify.
The draft document highlights structurally high energy prices in Europe, which are two to three times higher than in the US, as one of the major weaknesses in the bloc’s economic competitiveness. High bureaucracy is also a problem, because it increases costs and complicates the processes of establishing and maintaining businesses, hindering their ability to innovate and scale quickly. In addition, according to the report, productivity in the EU, or how much added value is created by an hour of work, has been dropping, and is way behind that of the US.
The report also details a shortage of qualified workers in the bloc, which is preventing the European internal market from reaching its full potential.
Commenting on the report, European MP Markus Ferber said it should be viewed as a call to action for EU policymakers, emphasizing the urgency of implementing structural reforms.
“The report shows that the issue of competitiveness must be a central theme in the Commission’s work in the future. There is a risk of a significant loss of prosperity,” he stated.
In November, former European Central Bank President Mario Draghi also warned that the EU urgently needs a major economic overhaul to regain competitiveness and prevent further decline. Draghi emphasized the need for substantial investment in innovation to close the gap with the US and China, estimating that up to €800 billion ($820 billion) annually, or about 5% of EU GDP, may be required.
According to dpa, the European Commission is expected to present a major legislative proposal at the end of February to address the current economic challenges within the bloc.
