The European Commission is due to publish its “competitiveness compass” in the next two weeks, which will give direction to future EU legislation on competitiveness. This communication will be accompanied by the 2025 Annual Single Market Report, of which Agence Europe has received a copy. In this document, economic trends in the EU are largely compared with those in the United States, which has put in place a massive plan for investment in clean technologies in 2022.
Echoing much of the work done by Mr Draghi and Mr Letta, the annual report on the Single Market notes that productivity is falling in the EU and that barriers to business persist. Unsurprisingly, the services sector suffers the most from barriers within the Single Market. While trade in goods in the EU has risen from just over 20% of GDP to 23.8% between 2018 and today, trade in services rose from 7% of GDP to 7.8% over the same period.
This is due to administrative barriers in the Member States, such as conditions of access to regulated professions or divergent legislation on employment and taxation.
While the Services Directive, the Directive on the recognition of professional qualifications and the Directive on proportionality checks have helped to reduce barriers, they are far from being fully complied with. The European Commission estimates that 60% of current barriers to the provision of services in the EU are of the same type as those present 20 years ago. A large number of infringement proceedings have been opened against several Member States for non-compliance with these directives.
The annual report also discusses bureaucracy and the regulatory burden as factors affecting competitiveness. “32% of EU companies consider regulation to be a ‘major obstacle’ to their investment activity. In addition, 34% of EU companies consider regulation to be a minor obstacle”, note the authors of the report. They compare these figures with statistics on US companies: “Only 21% see regulations as a major obstacle to investment”.
Also in line with the Draghi and Letta reports, the Commission highlights the lack of both private and public investment in the EU compared with the United States. According to the annual report, public investment in the EU reached 3.5% of GDP in 2024, which equals the proportion of public investment in the United States. However, “the funding landscape in the EU is fragmented and complex, with most funding taking place at national level”.
To see the 2025 Annual Single Market Report: https://aeur.eu/f/f0h (Original version in French by Léa Marchal)