Europe in recovery but UK businesses remain sceptical

Highlights from our 2014 report on The future of Europe.

As voting begins in the European elections today, we find that UK businesses are the least enthusiastic in Europe over further EU integration. Has the sovereign debt crisis irrevocably damaged Europe as a place to do business?

The economic outlook for Europe is much more positive in 2014, according to Grant Thornton’s latest International Business Report (IBR), the world’s leading mid-market business survey. Last year, our annual Europe report found regional stagnation with growth rates flat, unemployment rising and painful fiscal adjustments constraining the spending power of businesses, consumers and governments. 

Twelve months on the picture is much brighter; the region is expected to post modest growth in 2014, unemployment and debt levels are creeping down while measures of consumer and business confidence are rising. Read the full story in our 2014 IBR Future of Europe [ 4863 kb ] (PDF) report or scroll down for a summary of the key points.

The turnaround in fortunes is perhaps most evident in Portugal, Ireland and Greece – those economies hit hardest by the crisis – which are now returning to growth.

“There’s no doubt that the picture across Europe is much brighter now than it was 12 months ago,” says Scott Barnes, CEO of Grant Thornton UK LLP. “But the recovery is a fragile one – Europe is not out of the woods just yet. Deflation is a growing concern, as is the plight of youth unemployment, which is still unacceptably high. The situation in the Ukraine is also creating uncertainty. A loss of enthusiasm over the euro project from French and German business leaders could have a crippling impact on the recovery across the region, and derail the forward progress we've seen as of late.”

We’ve collated the key points from the IBR Future of Europe 2014 below.


Europe's recovery finally took hold in the second quarter of 2013. Since then it has spread out across the region, strengthening and steadily becoming more balanced. Output in the eurozone last year as a whole contracted by 0.4%, and the wider EU grew by just 0.1%, but the outlook for 2014 looks much brighter. Outside the single currency, the UK was the standout performer in 2013. The UK economy expanded by 1.9%, driven by increased consumer spending and a housing boom, and is expected to top that over the next two years.


The return to growth of Greece, Ireland and Portugal provides a major boost to supporters of fiscal austerity who have argued that economies should lower debt burdens rather than spend their way out of trouble. Governments in Spain and the UK are still suffering from having to bail out their large banking sectors and debt soared as the financial crisis erupted, almost doubling in the UK and almost tripling in Spain. Both are expected to run budget deficits of well over 5% in 2014. 

Labour market

Improvements in labour markets tend to lag recoveries as businesses work off excess capacity and wait for uncertainty to subside before hiring new people. In many European economies stringent legislation, which makes it hard for businesses to shed workers, exacerbates this issue. Consequently unemployment rates remains stubbornly high across much of the region, in stark contrast to the dramatic improvements seen in the USA.

Business growth

The strength of the recovery is further evidenced by renewed business confidence in the economic outlook. Business optimism across the EU climbed to net 37% in Q1, up from 21% in Q4 and just 2% this time last year. Higher levels of confidence in the economic outlook are feeding through into business growth prospects, with a increasing number of businesses expecting revenues to climb over the year ahead and profitability expectations rising even faster.


Business support for the euro remains high; 93% of businesses in the eurozone want the currency bloc to survive – the same level as last year – and while only 75% regard their economy’s membership of the euro as positive, only 9% want to leave. A majority of eurozone business leaders (62%) continue to support further economic integration of member states but there has also drop in enthusiasm for further integration in leading EU countries, such as Germany and France. Outside the single currency, UK business leaders (57%) are far less willing to integrate.

Scott Barnes adds: “I wouldn’t say that the UK figures equate to an ‘anti-Europe’ stance, but they certainly show a much greater reticence to closer ties than the rest of our European neighbours. It will be interesting to see what sort of influence the business voice has over the UK Government’s efforts to renegotiate the terms of its EU membership.”


Croatia joined as the 28th member of the EU in July 2013 and a further eight countries remain official (or potential) candidates. However, the sovereign debt crisis has clearly had a major impact on the draw both of Europe and the euro itself, for governments and businesses – 49% of European neighbour states in the IBR survey say the crisis has had a negative impact on the attractiveness of the EU as a place to do business, rising to 52% in Switzerland and 62% in Russia.

Moreover, business leaders see declining returns to further integration between their country and the EU; just 41% say this would benefit their business, down from 51% in 2013 and 62% in 2012.

Read the report

You can find the full survey results and analysis on Europe’s recovery, integration and expansion here: IBR Future of Europe 2014 [ 4863 kb ].

The Grant Thornton International Business Report (IBR) is the world’s leading mid-market business survey, interviewing more than 12,500 businesses leaders in 45 economies on an annual basis.

More than 3,100 chief executive officers, managing directors, chairmen and other senior decision-makers from all industry sectors in mid-market businesses were interviewed for this report between November 2013 and February 2014.

Read the report
Download PDF [ 4863 kb ]