Project

Investment Report 2024/25 - Chapter 3: Enablers and constraints for firms’ investment

European Investment Bank

DOI: 10.26303/q11x-rz64

What is it about?

Europe, looking closely at how firms are navigating economic challenges while continuing to move forward on the green and digital transition. Investment rebounded swiftly after the COVID-19 pandemic and energy crisis, supported by public policies and monetary easing, but has since stalled due to weaker economic growth, high uncertainty and financial constraints such as high interest rates. The chapter highlights structural issues in Europe’s financial system, which remains heavily reliant on banking and lacks alternative sources of funding for higher risk investments in innovation. Additionally, it discusses how regulatory burdens, a lack of workers with the right skills and fragmentation in the EU single market act as a break on investment.

Why is it important?

Understanding the enablers and constraints of corporate investment is critical for shaping policies that drive sustainable economic growth and competitiveness in the European Union. Investment is essential for firms to transition to a greener and more digital economy, yet financial and structural barriers threaten to slow progress. Without adequate funding mechanisms, businesses may struggle to scale up, innovate and remain competitive in a global marketplace. Furthermore, geopolitical uncertainty, high borrowing costs and regulatory hurdles exacerbate investment challenges. The chapter underscores the urgency of addressing these issues through better financial market integration, targeted policy interventions and a more business-friendly regulatory environment.

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Who is involved?