Head of Commercial Banking, HSBC Germany
Head of Commercial Banking, HSBC France
Even with the uncertainty caused by Brexit, Europe continues to play a huge role in global trade. It’s a very significant trading bloc with intra-EU goods trade hitting US$ 3.5trn in 2018, while trade with the two largest trading partners outside the EU – China and the US – remains very healthy.
And the EU’s role in global trade is only growing following the landmark trade agreement with Japan – covering economies worth about 30% of the world’s GDP – after signing deals with Vietnam in 2015 and Canada in 2016. (www.politicio.eu)
A fully integrated market
With 500 million consumers and accounting for 38% of global trade, Europe is a region that can’t be ignored, according to Christian Kolb, Head of Commercial Banking for HSBC Germany.
“Europe is a huge market and, more importantly, it’s a fully integrated market with free movement of people and capital,” he says.
“That means wherever global businesses choose to establish a base in Europe, they can easily branch out into the rest of the region. You don’t really have that kind of integrated market anywhere else in the world.”
Not surprisingly, Europe continues to play an important role in the corporate strategy of many multinationals. Businesses from Asia and North America, for example, are targeting international growth in Europe, while European businesses themselves look to strengthen their regional presence by increasing market share and moving into new local markets.
Strength in depth
For global companies operating in sectors such as automotive, food, energy, transport, luxury brands and entertainment, investing in Europe offers the know-how to build even stronger, world-class enterprises.
One of the biggest attractions is the sheer scale and scope of its industry sectors. There is real expertise and strength across the region, from automotive manufacturing to biomechanical engineering.
As an example, the EU is home to the world’s second largest aerospace industry, only behind the United States. It’s also the world’s biggest importer of aerospace products. The UK, France, Germany, Italy and Spain are at the forefront of the industry and are home to some of the world’s largest aerospace companies.
Also in the manufacturing sector, the automotive industry in Europe is vast with the Czech Republic among the largest manufacturers of motor vehicles in the region. The EU as a whole built 19.6 million motor vehicles in 20171, and the industry is the single largest R&D investor in the EU.
Across Europe, levels of investment in infrastructure are increasing again. Countries in Eastern Europe, in particular, are committing to major construction projects to modernise and upgrade road and rail links and airports and ports, while France’s Grand Paris Express – valued at some €22.6bn – is one of Europe’s largest transport project2.
Above all, Europe is among the world’s largest and most technologically advanced regions. There is a huge amount of knowledge, expertise, and skills across the continent that should be attractive to global businesses.
Innovation at the forefront
“People talk about ‘old’ Europe,” says Jacques Sourbier, Head of Commercial Banking for HSBC France.
“But when I see the levels of innovation across the region and the willingness of foreign companies to invest here, we really can’t talk about ‘old’ Europe anymore.”
“In France, for example, there is a real drive to increase innovation with a tax scheme designed to support companies researching and investing in innovation.”
Alongside innovation and R&D, many companies across Europe are leading the way in applying new technologies to improve their business models.
“We are very good at this in Germany,” explains Christian Kolb. “While we may not be the greatest inventors, we are world leaders in combining technologies such as robotics and AI with very sophisticated manufacturing to drive productivity and improve processes.”
Growth in the East
Alongside those larger economies such as France and Germany that have traditionally attracted the attention of international investors, there is now real growth and exciting opportunities in Central and Eastern Europe.
This is a very accessible area, and the transitioning economies of Poland, Czech Republic, Slovakia, Hungary and Romania in particular have very attractive long-term growth prospects, driven by investment, trade and growing consumption. In terms of GDP growth, Poland is projected to grow by 3.6% in 2020, the Czech Republic by 2.5%, Slovakia by 3.3%, Hungary by 2.8% and Romania by 3.7%3.
Central and Eastern Europe is an extremely well-connected and dynamic region with more than 80 million inhabitants, and it acts as a key trading gateway from Asia to the European Union.
A highly-skilled and productive workforce makes it a particularly attractive location, backed up by a well-developed logistics network that offers services at a lower cost than its Western counterparts.
There’s also significant growth in the region’s middle class, which has tripled in size in little over a decade. That has prompted a noticeable increase in consumer spending and significant opportunities for businesses investing in the region.
Western Europe will continue to offer excellent investment opportunities and real growth potential but global corporates should not overlook the fast-growing economies of Central and Eastern Europe.
Understand the market
For all its integration and connectivity, it’s important to understand that Europe is not one homogenous market, especially when it comes to culture and ways of doing business.
“Throughout Europe, culturally and the way people do business is different from one country to another,” explains Jacques Sourbier.
“Over my career, I have worked in Germany, the Netherlands, France and Belgium, and I am always struck but how such close neighbours geographically can be so different in their approaches to business.”
Understanding those differences and adapting to them is key to success, that’s where HSBC’s local presence, knowledge and expertise can be critical.
“In our European team, we have people working in their own home markets bringing that in-depth local knowledge but we also have people from other markets so you have a very healthy mix of cultures,” says Jacques Sourbier.
“This creates a European and global environment where we know the local requirements and ways of doing business, but also have that broader international understanding. That can be invaluable for clients coming into the region.”
Support on the ground
Alongside that local market knowledge, for global businesses exploring growth opportunities in Europe. HSBC’s presence and network across the region and globally means HSBC can support their ambitions, providing the bridge between the home market and this vast economic region.
“We have a physical presence in 20 markets in Europe,” explains Christian Kolb. “That gives us the ability to make connections between customers, help them set up in countries and meet potential business partners.”
“We also offer a single point of contact for clients setting up in Europe so no matter how many markets they are operating in, we can provide a consistent, uniform service, to help them achieve their ambitions.”