Solving private investment collapse is spur to Euro growth

 
Michael Bow
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A €750bn (£602bn) cash pile sitting idle on European corporate balance sheets must to be unlocked by governments to boost private investment and economic growth, an influential report claims today.

A “crisis” of private investment across Europe – which has plunged €350bn since 2007, four times the fall in real GDP and 20 times the plunge in private consumption – needs to be solved to drive EU growth, an institute at McKinsey & Company, the consultancy, reports today.

Policymakers at McKinsey have called for politicians to adopt a new type of industrial strategy – so called “microeconomic activism” – to remove barriers, so private investment can bounce back.

McKinsey Global Institute director Charles Roxburgh, said: “While each country faces different decisions and difficult trade-offs, we believe governments can do much to remove barriers to investment and, above all, dispel uncertainty.”

The EU-wide fall identified by the consultancy has been led by the UK, which accounts for 20 per cent of the drop in private investment across Europe, some €75bn.

McKinsey said construction and real estate were two sectors the UK historically lagged the EU on and needed to catch up on.

It identified higher education as a growth sector to capitalise on and a “major source” of investment.

The institute added that the UK government could relax campus planning laws and increase student visa quotas as a way to boost its lagging construction spending.