There is a growing fear in Europe that industrial decline is inevitable. Concerns about competitiveness, investment, energy costs, and the resilience of supply chains have moved from the margins of policy debate to the center and analysts have warned that Europe has structurally lost ground to Asia in manufacturing, technology, and scale. I do not accept that conclusion.
While the pressure is real and increasingly visible, the outcome is not inevitable. Recent manufacturing indicators show there is still momentum to build on. S&P Global’s Eurozone manufacturing Purchasing Managers’ Index rose to 52.7 in August, its strongest reading since May 2022, with factory output growth at a four-and-a-half-year high. Europe now needs to put investment behind its industrial ambitions at a pace and scale that matches the challenge.
Across global manufacturing, competition depends less on isolated advantages and more on how effectively entire systems operate in harmony. Asian manufacturers have built highly integrated industrial ecosystems that combine supply chains, component production, software capabilities, and consumer platforms. They operate with structural cost advantages—cheaper energy, lower raw material costs, and sometimes significant state support—that European manufacturers simply do not have access to. This allows them to enter the European market with products priced far below what European production can match.
However, Europe still has several advantages. It has deep engineering capability, strong industrial know-how, trusted brands, and a long-standing leadership in innovation, energy efficiency, safety, and sustainability. In many categories, “Made in Europe” still signals durability, precision, and design quality. Regulation has also pushed European industry to lead globally in energy efficiency and circularity, which are central to the future of manufacturing.
The task now is to convert these strengths into sustained industrial scale and commercial competitiveness. Recent interventions by Italian minister for enterprises and Made in Italy Adolfo Urso and members of the European Parliament, including calls for stronger safeguards against unfair competition, closer scrutiny of non-EU imports and more robust support for strategic manufacturing sectors, are important in this respect. Europe cannot afford to spend another cycle discussing industrial strategy without putting in place the conditions for companies to invest, produce, and compete.
The challenge for Europe is not capability. It is the conditions under which that capability must operate. Energy costs in Europe remain structurally higher than in other regions. Capital markets remain fragmented. Overlapping regulations, although well-intentioned in isolation, create compounding compliance burdens for manufacturers already operating on compressed margins—a single washing machine, for example, is subject to at least ten different pieces of EU legislation.
Measures such as the Carbon Border Adjustment Mechanism (the EU’s carbon tax) and the steel safeguard framework may respond to legitimate policy concerns, but their cost and competitiveness effects must be assessed across the entire value chain. Downstream manufacturers cannot be expected to absorb rising input costs without an industrial policy that supports investment, modernization, and demand for efficient products.
Moving from ambition to action
Europe does not need another cycle of self-diagnosis. The challenges, by now, are well understood. What industry needs is execution at speed and scale that aptly reflects the competitive reality facing European manufacturing.
Existing initiatives, including the Clean Industrial Deal, should evolve from policy ambitions into practical instruments that deliver investment, strengthen manufacturing competitiveness, and can be deployed at the speed required by today’s geopolitical and economic realities. Europe cannot afford to lose more time.
Europe must become more effective at building industrial-scale capabilities. That includes reducing unnecessary fragmentation in capital markets, supporting consolidation where it strengthens competitiveness, and ensuring regulation keeps pace with innovation rather than slowing its deployment.
Energy also needs to be treated as a core pillar of industrial competitiveness. Cost, security, and decarbonization are now inseparable. Without competitive energy systems, industrial leadership will remain constrained regardless of innovation strength.
Finally, the industry itself has to move with greater urgency. We cannot wait for perfect conditions to make investment decisions in automation, R&D, and new service-based models.
Europe does not lack the foundations of industrial leadership. It lacks the policy conditions to sustain it at the speed that the competitive environment now demands. Once industrial capacity is lost, factories are closed, skills dispersed, and supply chains relocated, it does not return.
The next decade will not reward the largest legacy businesses. It will reward those who can translate capability into scale, and scale into competitiveness. The time to invest in Europe’s industrial future is now. But investment requires the right conditions and Europe must create them.
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