Europe is one of the world’s leading regions in terms of sustainability and inclusion, but its per capita income remains 27 percent lower than in the United States. Closing that prosperity gap depends on accelerating growth by becoming more globally competitive.

Turbulent times have highlighted new fragilities in Europe’s economies. Addressing them could be the catalyst for a new wave of competitiveness and growth, according to McKinsey's new report "Accelerating Europe: Competitiveness for a new era".

"If Europe fails to improve its competitiveness, we estimate that about €500 billion to €1 trillion of value added could be at stake annually by 2030. For perspective, this is three to six times the incremental annual investment needed to achieve net zero. Strengthening Europe's competitiveness is crucial for fostering future economic growth," says Jukka Maksimainen, senior partner at McKinsey Helsinki office and the global co-leader of the Global Energy & Materials practice.

The McKinsey report lays out ambitious goals for Europe to focus on to improve its competitiveness:

• Doubling innovation-related private and public spending, for instance in the field of AI, where Finland has good opportunities to achieve productivity gains thanks to its high level of digitization.
• Doubling the average scale of leading firms, for instance by introducing a “28th regime” of common EU business rules.
• Very aggressive development and accessing new energy sources with the goal of halving the price of energy while reducing emissions.
• Accelerating reskilling, labor redeployment, and talent attraction to enable technology adoption.
• Adding approximately EUR 370 billion of annual corporate investment and doubling the inflow of greenfield FDI, for example by supporting venture capital.
• Securing access to critical materials, for example by creating an attractive operating environment to increase ore exploration and develop promising ores to production readiness.

Rethinking regulation and industrial policy. Legislation regulating companies should support growth and be proportionate, overregulation should be reduced.

“Now is the time for Europe’s policy makers and business leaders to collaborate and craft a bold, integrated agenda built around ambitious goals to accelerate competitiveness and growth in Europe," says Maksimainen.

The report " Accelerating Europe: Competitiveness for a new era " is based on a McKinsey Global Institute analysis of 1,000 European companies and examines the pressures on European competitiveness in seven key areas – innovation, energy, supply chains, capital, talent, company size, and competition and markets.