A study of European business reveals a cautious investment outlook and warns of the cost of new regulations. Antonio Fabrizio reports.
European business lobby group BusinessEurope has called on policy-makers to make restoring access to finance a top priority and to be mindful of cost of capital when introducing new regulations.
It warned that an interplay of factors including a perceived ongoing credit squeeze, limited access to finance and a high cost of capital would translate into less investment and growth.
However BusinessEurope revised its GDP growth forecast to 1.8% for 2010, up from 1.1% based on its latest survey of its members.
Exports are a main driver of growth, increasing by 10% in August for trades within Europe and to non-EU countries.
For exports going to destinations outside Europe only, growth was 17% in August 2010 compared to a year before.
Germany top for export growth
The countries with the largest export growth in August were Germany at 15%, Poland at 21% and Sweden at 10%.
These three countries also recorded the highest investments. Next year, Poland is expected to increase investment by 11% and Sweden anticipates a 7% rise.
The report highlights that conditions for an upturn in capital spending have gradually improved since June 2010. More than 50% of BusinessEurope members expect to increase levels of investment next year.
However utilisation of equipment is below pre-crisis levels, and slower corporate restructuring is negatively affecting investment and productivity developments.
Firms also perceive the risk of a persistent credit squeeze as a factor in holding back investment decisions. Limited access to finance was cited as having a negative influence on investment decisions by 40% of respondents.
BusinessEurope urged regulators to introduce proportionate initiatives, mindful of their impact on cost and availability of capital.
It said that Basel III’s tighter capital rules for banks may be needed but will have consequences for lending, trade finance and hedging activity.
Smart regulation would mean introducing policies effective and proportionate in their scope and nature, BusinessEurope noted.