Data hub
Improving the EU’s investment environment
In recent years, the investment gap between the EU and the U.S. has widened, with the U.S. remaining a top global destination and the EU experiencing significant declines in foreign direct investments (FDI). Meanwhile, China’s FDI flows have been relatively stable, though recent trends show some decline.
Given that investments are essential for long-term competitiveness, the EU must intensify efforts to attract and retain capital. Creating an investment-friendly environment requires reducing barriers to cross-border capital flows, effectively implementing the long-promised Capital Markets Union (CMU), and strengthening national capital markets within Member States.
Source: UNCTAD FdiFlowsStock
Our latest Reform Barometer reveals serious concerns among the European business community about the EU’s investment climate. A striking 82% of respondents believe that the EU’s attractiveness for investment has either deteriorated or remained unchanged over the past 12 months. The biggest challenge that they identify is overregulation, followed by high energy prices and labour shortages.
How do you think the EU investment environment is seen by global firms compared to 12 months ago?
Source: BusinessEurope Reform Barometer 2025, members’ survey.
Productivity as a major EU challenge
Labour productivity remains one of the EU’s most pressing challenges, consistently trailing behind that of the U.S. over the past decade.
Data from the International Labour Organization show that the productivity gap – measured as GDP per hour worked – has continued to widen between the EU and the U.S. This growing disparity underscores the urgent need for robust structural reforms and increased investment in innovation to bridge the divide.
Source: ILO – modelled estimates
Transatlantic trade relationship
The EU and the U.S. share a deeply integrated economic relationship, with record levels of bilateral trade and investment. In 2023, they jointly accounted for approximately 30% of global trade in goods and services and 43% of global GDP.
Bilateral trade in goods and services reached €1.6 trillion, underscoring the magnitude of their economic interdependence. While the EU has for long maintained a trade surplus with the U.S., it has also grown increasingly reliant on U.S. imports in sectors such as LNG and military equipment.
Source: Eurostat
An overwhelming 85% of our national member federations believe that the new U.S. Administration’s deregulation agenda will further divert investment away from Europe. The EU must act with greater urgency to reduce regulatory burden on companies and strengthen its appeal as an investment location.
What do you think will be the consequences for investment in Europe from the next U.S. administration?
Source: BusinessEurope Reform Barometer 2025, members’ survey.
High cost of energy
A major challenge undermining the competitiveness of European industry – especially in comparison to the U.S. and China – is the high cost of energy, which significantly raises production expenses.
Ensuring affordable energy access is therefore critical for sustaining European business competitiveness. In 2024, industrial electricity prices in the EU reached €0.199 per kWh, compared to €0.082 in China and €0.075 in the U.S. This stark price disparity directly impacts the EU’s industrial competitiveness.
Source: Eurostat
EU as an innovation hub
The EU has been and continues to be a successful research union. However, with international competition intensifying, Europe’s performance is improving at a slower pace than that of our key global competitors.
Currently, our investment in research and innovation stands at 2.2% of GDP – significantly lower than the US (3.4%) and China (2.4%). This widening gap has turned into a critical challenge with long-term negative implications for the EU’s competitiveness. Creating an attractive climate for investment and innovation in Europe must be a top priority in the coming years.
Source: World Intellectual Property Organization