According to Eurostat, about 90% of large companies surveyed by the European Central Bank (ECB) attribute their indecision to weak demand. About 80% of respondent companies are also strongly concerned about low profitability, high labor costs and regulatory burdens.
The combination of high energy prices and geopolitical tensions, which has a negative impact on the production sector, is also more often cited by companies as a reason for the decline in business activity. And unpredictable climate regulations undermine companies’ long-term planning.
There are regional differences as well. Notably, some of the lowest investment rates at the end of 2025 are in Europe’s main business centers – Luxembourg, Ireland and the Netherlands, all at less than 17%. While the overall level is declining, Hungary and Croatia have the highest investment rates in the bloc, at more than 28%.
“Business investment is the main driver of GDP growth. Investment in hardware, software, factory is behind the engine of productivity growth,” INSEAD economics professor Antonio Fatas told Europe in Motion.
This is all the more important for Europe, as it has lagged behind the US in productivity growth by an impressive 2% in recent years.”
At the same time, “the expected increase in defense spending is quite widely perceived as a potential catalyst for investment,” the ECB said, as “half of industrial companies and a fifth of respondents from the services sector expect it to support their investments over the next three years.”
