European CEOs Raise Warning Flags On Europe's Weakening Competitiveness

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International CEO Confidence

European CEOs Raise Warning Flags On Europe's Weakening Competitiveness

23 May 2023 / Report

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CEO Insight Minute: What Do CEOs in Europe Think About What Lies Ahead?

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CEO Insight Minute: What Do CEOs in Europe Think About What Lies Ahead?

Although confidence has risen from its all-time low in Q2 2022, more than 80% of CEOs believe Europe’s competitiveness as a base for industry is weakening.

The Conference Board Measure of CEO Confidence™ for Europe: H1 2023

The Conference Board Measure of CEO Confidence™ for Europe by ERT has returned into positive territory in the first half of 2023 from the extreme lows seen six months ago. It currently stands at 53, up from 24 in the second half of 2022, when confidence hit an all-time low. A reading above 50 reflects more positive than negative responses. A mildly positive perception of current economic conditions as compared to last autumn and somewhat more optimistic expectations for their own industry over the next six months were the primary drivers of the measure’s improvement.

However, the starkest finding of our H1 2023 survey is that more than 80 percent of CEOs believe Europe’s competitiveness as a base for industry is weakening.

Trusted Insights for What's Ahead™

A key driver of confidence, the short-term economic outlook also improved in Europe from six months ago, although they still remain pessimistic with negative views outweighing the positive ones. Only a quarter of CEOs are looking at the next six months with optimism.
In parallel with Europe, The Conference Board Measure of CEO Confidence™ surveys in China and the US were also completed in late April. Results diverge markedly across the three regions. In the US, the quarterly-published measure ticked down in Q2, from 43 to 42, while in China it surged to a new high in H1 2023, from 42 six months ago.
CEOs’ aggregate views on their company’s sales, employment, and capital investment improved both inside and outside of Europe.
However, CEOs are more optimistic about the short-term prospects of these key indicators outside of Europe than within.
More than 80 percent of CEOs believe Europe’s competitiveness position as a base for industry is weakening.
CEOs see geopolitical risks, inflation, and energy costs as the top issues that will continue to impact their company’s business competitiveness over the near term. Skills shortages and supply chain disruptions complete the top-5 list of risk factors.
In light of sliding competitiveness, CEOs expect to move investments and/or company operations away from Europe in the near-term. In fact, more than half of CEOs and Chairs (57 percent) are planning to shift investments and/or operations from Europe to North America over the next two years. An equal share of respondents expect their customers to do the same.
A lower share of respondents (32 percent) expect to shift investments and/or operations for their company from Europe to Asia (excluding China), while almost 40 percent expect their customers to do so. On the contrary, only 7 and 11 percent of respondents see investments and/or operations shifting away from Europe to China for their company and customers, respectively.
CEOs view current geopolitical tensions as having a negative effect on their company’s business prospects in Europe. Namely, more than two-thirds of respondents (70 percent) rate the impact of current geopolitical tensions on their company’s business prospects in Europe as either somewhat negative or negative.
Outside Europe, 40 percent of CEOs see the current geopolitical landscape as having a favorable impact on their company’s business prospects in North America. A smaller percentage (33 percent) shares the same view about Asia (excluding China), but not for China. In fact, almost 80 percent of CEOs rate current geopolitical tensions as having a negative impact on their company’s business prospects in China. Finally, more than 70 percent of respondents rate the impact current geopolitical tensions have on their company’s business prospects in Africa and South America as neutral.