The bombshell from Cologne reverberated as far as Brussels and Berlin: at the end of January 2025, Matthias Zachert, CEO of the chemical company Lanxess, attracted a great deal of attention with his announcement that the company would in future be investing primarily in the USA instead of in Germany. Zachert complained about an ‘EU bureaucratic monster’ that slows down innovation and discourages investment. The Lanxess case is emblematic of the challenges facing European industry.
In recent years, European industry has lost a significant amount of competitiveness. According to estimates by the European Trade Union Confederation (ETUC), around 853,500 industrial jobs were lost in the EU between 2019 and 2023. Energy-intensive sectors such as the chemical, metal and paper industries have been particularly hard hit. The trend towards deindustrialisation is particularly evident in Germany, Poland, the Czech Republic and Romania.
One key factor is the sharp rise in energy prices. European companies now pay up to four times higher gas prices than their competitors in the US. At the same time, the regulatory burden is continuously increasing. Regulations such as the CSRD directive on sustainability reporting or the EU supply chain directive tie up human and financial resources – especially in medium-sized companies.
In addition, geopolitical tensions such as the Ukraine conflict, the trade conflicts between the US and China, and insecure supply chains are causing uncertainty. In Germany, the situation is exacerbated by the shortage of skilled workers: according to the Cologne Institute for Economic Research (IW), there was already a shortage of over 530,000 qualified specialists in October 2024. This figure is expected to continue to rise in the coming years: the consulting firm PwC estimates that German companies will face a shortage of around 3.5 million workers in 2030. So there are plenty of reasons for companies to worry.
Europe as an economic area – why the EU is so important for industry
In view of the daily stream of bad news – for example from the German automotive industry – the question arises: is Europe doomed as an industrial location? Far from it! A few figures make it clear why the swansong sounds too early. With around 450 million consumers and a GDP of 16 trillion euros, Europe is still one of the most important economic and industrial locations in the world – and thus a unique sales market for industrial customers. Europe's population is roughly comparable to the entire USMCA zone (USA + Canada + Mexico). The USA alone has a higher GDP than the entire EU. If Canada and Mexico are included (USMCA), North America as a whole is the largest economic area. In terms of per capita GDP, the EU is ahead of China – but behind the USA.
One of Europe's strengths is market integration: within the EU, uniform rules apply (CE marking, product liability, exemption from customs duties), making the EU a particularly well-integrated single market. In North America, on the other hand, there are many technical barriers to trade, e.g. different standards in the US and Mexico, and the Trump administration's tariff policy is exacerbating trade barriers. In addition, there is the enormous purchasing power – per capita, it is significantly higher in the EU than in China – which makes the EU particularly attractive for premium products. Although the North American market has higher incomes, it also has higher social and regional disparities.
For industry, there are three factors that speak in favour of the European market:
- The single market already mentioned, which guarantees the free movement of goods, services, capital and people. Produced goods can be sold across borders without customs duties and with harmonised standards. Companies benefit from Europe-wide supply chains in which components are manufactured where it makes the most economic sense. And Europe is not just a market, but also an integrated production area, for example through just-in-time deliveries within the EU.
- Europe offers a unique density of industrial clusters – from mechanical engineering in Germany and the chemical industry in Belgium to high-tech and electronics in the Nordic countries. These clusters form strong ecosystems in which companies work closely with suppliers, universities, start-ups and research institutions.
- Through regulatory initiatives such as the Green Deal, the Clean Industrial Deal and the Circular Economy Strategy, the EU is setting global standards. Those who produce in Europe meet the highest environmental and social standards – this is increasingly becoming a competitive advantage because these standards are also gaining in importance worldwide.
At the same time, Europe is investing an above-average amount in research and development. The EU spends around 2.2% of GDP on research – in key technologies such as hydrogen, AI or battery technology, Europe is among the world leaders. In many future technologies, Europe is among the global pioneers – particularly in areas such as the circular economy, hydrogen technology and green chemistry.
