1. James Watson, Director Economics
Increasing EU industries, challenges and opportunities- focus on access to finance
James Watson, Director Economics
Brussels, 12 November2014

2. Outline
Importance of manufacturing
Access to finance situation
BUSINESSEUROPE access to finance priorities

3. Industry as backbone of the economy
Direct and indirect employment in the manufacturing sector (2012) in 1000
Source: Eurostat (2013), WIOD (2013), calculations by IW 6

4. Share of global manufacturing value-added
EU is losing global manufacturing share
Share of global manufacturing value-added
Source: UN (2013), OECD (2013), Eurostat (2013), calculations by IW 6

5. Manufacturing and Employment well below pre-crisis levels

6. Recommendations for an industrial compact
Industrial competitiveness throughout all policy areas
ECONOMY
ENERGY AND CLIMATE
SINGLE MARKET
EMPLOYMENT
ENTREPREN- EUSHIP
TRADE 6

7. Bank loans to corporations have fallen
Result of both demand and supply factors

8. Corporate bond issuance has risen

9. Financial fragmentation has eased slightly
Eg 3% Germany, Austria, 4% Portugal, > 5% Greece

10. 5 Priorities for access to finance
Complete banking union
Right balance on prudential regulation
Attractive tax environment – no FTT
Use public funds to leverage private – EIB
Alternative financing routes

11. The EU continues to lag on Venture Capital funding
Venture capital funding (%GDP), 2011 (most cases)

12. But VC investors may be acting rationally...
Average US and UK fund performance
Source: Nesta, Unchaining Investment

13. Conclusion
Access to finance problems damaging growth and jobs
Likely to become increasing constraints
But investment and growth needs an attractive business environment
High policy uncertainty an issue
High costs of doing business in EU – regulation, energy, tax labour costs