Industry features as an economic hub to the economy, because it offers an important market for suppliers from other sectors. Business services as well as other non-industry sectors strongly benefit from industry’s demand. In fact, every unit of additional demand in the manufacturing sector generates 1.68 units of additional output in the total economy.
Regarding employment, while manufacturing directly provides 32 million jobs in the EU, more than 20 million jobs indirectly depend on industry in supply sectors.
This deep and mutually productive integration, particularly with the service sector, renders the traditional antagonism between industry and services obsolete. Moreover, industry fosters important growth factors.
With a share of 15 per cent of VA in the total economy, industry is responsible for 65 per cent of R&D expenditure and 76 per cent of merchandise exports.
These factors contribute to an above-average productivity of manufacturing so that industry can pay higher wages. Besides industry exerts additional beneficial effects on the overall European economy because of its integrative function. Take the example of industrial frontrunners, i.e. large, innovative and internationalised manufacturing firms. These frontrunners have an important carrier function because they offer platforms for other firms to integrate in international value chains and cross-border innovation networks. As innovation and internationalisation are key entrepreneurial success factors, frontrunners can indirectly contribute to the increased competitiveness of other sectors.
However, this new world of ever closer integration and competitiveness across Europe needs active engagement. Businesses have to be efficient and reliable to become parts of successful international value chains. Policy makers also have an important role to play. They can enable EU companies to become more competitive by providing a business- and innovation-friendly economic framework. This task rests mainly in the realm of EU member states. However, the EU itself can also significantly contribute.
What is required is a new EU Industrial Compact that focuses much more on industrial competitiveness than in the past. In this respect, the re-orientation of EU industrial policy is very welcome, but still lacks rigorous implementation. This is particularly relevant regarding the energy and environmental field. Therefore, the new EU Industrial Compact should better balance industrial competitiveness needs with other objectives of EU policymaking. In addition, EU industrial policy should go on opening markets, both internationally and within the EU Single Market, enhancing cross-border infrastructure in transport, broadband and energy connections and offering platforms for cooperation in innovation and facilitating the dissemination of best practices (particularly to SMEs).