{"id":670608,"date":"2026-05-14T15:04:15","date_gmt":"2026-05-14T15:04:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/670608\/"},"modified":"2026-05-14T15:04:15","modified_gmt":"2026-05-14T15:04:15","slug":"tariffs-weak-demand-and-climate-confusion-drag-eu-business-investment-rate-to-11-year-low","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/670608\/","title":{"rendered":"Tariffs, weak demand and climate confusion drag EU business investment rate to 11-year low"},"content":{"rendered":"

By&nbspAlessio Dell’Anna<\/a>&nbsp&&nbspvideo by Loredana Dumitru<\/p>\n

\n Published on
\n 14\/05\/2026 – 11:20 GMT+2\n <\/p>\n

European businesses are pulling back on their investments.<\/p>\n

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The EU’s business investment rate fell to its lowest level in more than a decade, reaching 21.8% in Q4 2025, according to new Eurostat<\/a> data.<\/p>\n

The rate basically measures how much money companies are investing in things such as machinery and buildings, relative to the total value they create.<\/p>\n

The index doesn’t take into account banks and financial corporations but rather “regular businesses”, such as hotels, factories, supermarkets, airlines and so on.<\/p>\n

Interestingly, the EU business rate peaked right before COVID-19, in Q4 2019 (26.77%), driven by surges in intellectual property imports and globalisation dynamics, according to Eurostat, while the current rate sits just one point above the deepest point on record, 20.93% (Q1 2010), in the aftermath of the last great financial crisis.<\/p>\n

Where are businesses reinvesting the least in the economy?<\/p>\n

Strikingly, some of the lowest investment rates came from Europe’s main business hubs: Luxembourg, Ireland, and the Netherlands, all less than 17%.<\/p>\n

While Luxembourg’s rate has historically been low, due to the country’s small industrial sector, Ireland has lost 27 percentage points in less than a decade.<\/p>\n

“Business investment is a major determinant of GDP growth. Investment in equipment, software, factories…is clearly behind the growth engine of productivity”, INSEAD Professor of Economics Antonio Fatas tells Europe in Motion.<\/p>\n

“This is even more important for Europe, as it has been falling behind the US when it comes to productivity growth in recent years”, with a gap of almost 2%, which Professor Fatas deems “shocking”.<\/p>\n

At the same time, Greece had one of the fastest increases across the bloc since 2015 \u2014 with almost 10% \u2014 while Hungary and Croatia saw the highest rates across the bloc, both standing at more than 28% in the latest year on record for single countries.<\/p>\n

Why do companies pull back and can defence bring new investments?<\/p>\n

The European Central Bank (ECB) has a few answers, after it surveyed 64 leading firms in the Euro area about recent and expected investment decisions, and the factors driving or constraining them.<\/p>\n

Some 90% of large businesses surveyed blame their hesitance to spend on the current weak demand. <\/p>\n

But they’re also greatly worried about low profitability, regulatory burdens, and labour costs cited by more than 80% of firms.<\/p>\n

Geopolitical tensions also took a toll, particularly on manufacturers hit by tariffs and war disruption. <\/p>\n

They also said that unpredictable climate regulations are weighing on their long-term plans, even more so than the current energy crisis.<\/p>\n

At the same time, “anticipated increased defence spending is quite widely perceived as a potential catalyst for investment,” the ECB said, as “half of the industrial firms and a fifth of services respondents expected increased defence spending to support their investment over the next three years.”<\/p>\n

The research was conducted on a majority of 39 businesses active in the industrial sector, while the other 25 focus primarily on services.<\/p>\n","protected":false},"excerpt":{"rendered":"By&nbspAlessio Dell’Anna&nbsp&&nbspvideo by Loredana Dumitru Published on 14\/05\/2026 – 11:20 GMT+2 European businesses are pulling back on their…\n","protected":false},"author":2,"featured_media":670609,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,2458,3745,164,2588,5474,11499],"class_list":["post-670608","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-data","tag-ecb","tag-economy","tag-european-union","tag-investment","tag-statistics"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/670608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=670608"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/670608\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/670609"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=670608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=670608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=670608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}