Business leaders blame skills shortage for Europe’s industrial decline

Business leaders and financial policymakers have claimed that a lack of skilled workers is one of the key factors impeding the reindustrialisation of the European economy.

The comments come amid falling industrial production as well as record low levels of unemployment across the EU. Industrial output is down 5.8% compared to last year, while joblessness is at an all-time low of 5.9%.

They also follow a study published last year by the European Investment Bank (EIB), which found that 85% of European firms deemed a lack of sufficiently skilled staff an impediment to investment – making it the most commonly cited obstacle ahead of high energy prices (82%).

Speaking at an event held by Belgium’s regional and federal investment firms on Monday (5 February), senior business and financial officials repeatedly emphasised the importance of addressing the bloc’s skills shortage.

“When we talk on the topic of reindustrialisation, we should realise that there is a lot of know-how in our countries,” said Michel Casselman, the general manager of PMV, the investment arm of the Flemish government. “But that is disappearing when industry is going.”

Casselman further stressed that there is now a “real urgency” to protect and nurture the “history and knowledge that is still here” before it is too late.

“We have to make sure that we work on reindustrialisation before our history has disappeared, and that is really why we have to act now,” he added.

‘One of the biggest difficulties’

Marjut Falkstedt, the secretary general of the European Investment Fund (EIF), which provides venture capital to small and medium-sized enterprises (SMEs) and is majority-owned by the EIB, similarly noted that “one of the biggest difficulties [faced by] companies is access to skilled labour”.

“[We] now need public authorities to focus on upscaling and improving training possibilities and also look with a new eye at the university system and high schools,” she said. “We have to re-think the skills [and] skillset of our workforce.”

Tom Paemeleire, the CEO of Kebony, a Norwegian-based wood producer who also runs a factory in Antwerp, added that a lack of skilled labour was merely a symptom of a broader economic challenge confronting Europe’s industry, namely a tight labour market. 

“I really believe [that] if we are to face demographics and retain industrial activity, we have to be very inclusive in our approach to the labour market and make sure that we have the right policies to realise all the potential there,” he said. 

“We have to get everybody to work. Because it’s sometimes easier in our case to find a specialised R&D person than it is to find a machine operator, and that’s really a bottleneck.”

Belgium: A microcosm of Europe?

Belgium, which assumed the six-month rotating presidency of the Council of the EU in January, arguably suffers more acutely than most member states from the twin challenges of creeping deindustrialisation and a historically tight labour market.

Belgium’s industrial output has declined at twice the EU average rate over the past year (11.6% vs 5.8%), while its unemployment rate is at a near-record low of 5.7% – below the EU average of 5.9%.

Over the last quarter century, the role of manufacturing in the economy has also shrunk more rapidly in Belgium than in the rest of Europe. Value-added manufacturing as a total proportion of GDP in Belgium fell from 18.2% in 1998 to 12.6% in 2022, while across the EU as a whole, it dropped from 17.8% to 15%.

Encouragingly, European policymakers have increasingly highlighted the need to protect Europe’s industrial base in recent months – including Belgium’s own leaders.

Last month, prime minister Alexander De Croo explicitly called for an EU Industrial Deal “alongside the Green Deal” in order “to keep industrial production here with us in Europe”. 

De Croo’s remarks were echoed by Belgian finance minister Vincent Van Peteghem, who urged the EU to “cut red tape” to incentivise European investment.

EU should 'cut red tape' to halt industrial slump, Belgian FM says

Belgian finance minister Vincent Van Peteghem has said that developing an ‘Industrial Deal’ will be one of the key priorities of his country’s EU Council presidency, adding that “cutting red tape” and improving the bloc’s general investment climate are key to arresting the bloc’s industrial decline.

Salt in the (industrial) wound?

The aforementioned event also occurred on the same day two studies were published, which vividly demonstrated the severity of Europe’s economic predicament.

The OECD, a group of mostly rich countries, downgraded its projected growth rate for the eurozone this year from 0.9% to just 0.6%, citing the “continued adverse effects of the energy price shock” as a key reason for Europe’s anticipated sluggish growth.

Notably, the report also urged countries to introduce “policy reforms to improve educational outcomes [and] enhance skills development” to boost growth.

Meanwhile, the ifo Institute, a Munich-based think tank, published a survey which found that 36.9% of German manufacturers reported a lack of orders last month, up from 20.9% in January 2023. Germany is the EU’s largest economy.

Klaus Wohlrabe, the institute’s head of surveys, noted that “hardly an industry has been spared” from the lack of demand over the past year, although energy-intensive industries were the worst affected.

'Very worrying': Trade unions alarmed by EU's industrial collapse

Europe’s major trade union organisations have expressed deep concern about the scale of the EU’s industrial decline, as structurally high energy prices continue to lay waste to a crucial pillar of the bloc’s economy.

[Edited by Alice Tayor]

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