Despite this boom, which is accompanied by a growing confidence of companies and industrialists in European industrial capacities, several major challenges are slowing down this trend, to which must be added “employment” and the cost of production, in relation to the China.
According to a report by the British newspaper ‘Financial Times’, demand for factories in Europe has increased by 29% over the past year amid a stampede by manufacturers and investors in a bid to reduce dependency towards China for two main reasons, namely (geopolitical concerns and supply chain crisis).
Despite the economic slowdown in the region, manufacturers around the world are taking over more European factories. Driven by worries about geopolitical tensions and the supply chain crisis, manufacturers and companies are aiming to bring their operations directly closer to customers in Europe.
Companies acquired or leased 9.6 million square feet of industrial space in Europe in 2022, a 29% increase from 2021, according to data released by Cushman & Wakefield, a US-based global commercial real estate services firm. whose analyzes cover real estate transactions in nine European countries, including the United Kingdom, France and Germany.
Increase confidence in European capabilities
For his part, the Berlin analyst and journalist, Muhammad Khafaji, indicates in exclusive statements to the “Sky News Arabia” site that:
In recent years, European Union countries have seen an increase in demand for factories and the industrial sector in the region. This indicates that there is growing confidence in Europe’s industrial capabilities. However, relying entirely on European industry and completely replacing China can be a difficult challenge. China is one of the largest industrial countries in the world, characterized by low production costs and massive manufacturing capabilities. In addition, it is considered a large market for industrial products, which encourages companies to invest in order to develop their activities there. There are also significant European investments in China which make the interdependence with the Chinese economy more powerful and more complex.
“Clients are finally getting closer by investing in European production… so they are less dependent on China as well as other remote locations,” said the Financial Times report quoting Cushman Wakefield’s head of logistics and industrial services in Europe. , Tim Creighton. .
Asian manufacturers in Europe are acquiring European factories in response to demand from customers on the continent, who in recent decades have outsourced much of the goods they buy, both to China and other hubs low cost manufacturing.
The increased demand for new factories comes as European industrial acreage has shrunk, with plummeting consumer spending prompting retailers and warehouse owners to cut investment.
And the companies are rethinking their strategy amid deepening tensions between Western governments and Beijing, as well as severe disruptions to global supply chains during the Covid-19 pandemic, according to the newspaper.
Creighton said the use of robots in manufacturing (..) has created a “compelling” argument for European companies to step up production closer to consumers.
Improve industrial capabilities
Returning to Khafaji’s statements, he indicated that the European Union was working to strengthen its industrial capacities and to develop innovation in the field of industry. There are many strong technology sectors in Europe, such as automotive, aviation, pharmaceuticals and clean technologies. The European industrial sector benefits from high quality and strict standards in terms of quality, safety and environmental protection.
Khafaji added: “Europe is considered one of the biggest economic powers in the world and has strong industrial capabilities in many sectors. For example, the automotive industry in Germany and France is one of the most major industrial sectors in the world and is famous for cutting-edge, high-quality technology.There are also many large European companies in fields such as aerospace, medical equipment and clean technologies.
And he continues: “Germany and China, for example, have a strong trade exchange in the industrial sector. According to official statistics, the trade volume between China and Germany reached (297.9 billion dollars). euros in 2022), and China is a major trading partner of Germany in areas such as cars, machinery and industrial equipment, which strengthens economic relations between the two countries and makes it difficult for either to do without the other.
He explains that mutual investments have played an important role, as China is one of the most important countries in which German companies manufacture their products. For example, the German car giant Volkswagen in China operates around 27 production sites containing 40 factories.
It also indicates that European countries attach great importance to innovation, research and development in the industrial sector. Huge investments are being made in technology development and innovation in areas such as artificial intelligence, robotics, clean technologies and smart manufacturing. This strengthens Europe’s ability to develop high added value products and respond to market needs.
Opportunities and Challenges
In addition, the analyst and journalist explains the most important opportunities and challenges facing Europe in the industrial sector, as follows:
Europe faces some challenges in trying to fully industrialise. Among these challenges are the high production costs in some European countries and the competitiveness of world markets. However, there are also great opportunities, such as increased demand for high-quality products made in Europe, and improved innovation and technology to boost competitiveness.
In this context, the British newspaper quotes CTP’s director of customer relations, Bert Heslink, as saying that manufacturing sites are an increasing part of the company’s portfolio since demand for warehouse space has fallen.
Although investments in new sites have increased costs for manufacturers during a period of already high inflation, he said companies were prioritizing securing their operations against the next supply chain ‘disaster’ .
And after years of investment by Western multinationals in China, business leaders are also warning that Europe lacks a suitable manufacturing workforce. “It’s a challenge (to find people with the right skills), and it needs to be addressed, for example by bringing in workers from foreign countries,” Hesselink said.
The Berlin analyst and journalist concludes his interview with “Sky News Arabia Economy” by saying: “In general, Europe can rely on itself to a large extent in the industrial sector, but the complete dependence on European industry and the complete replacement of China is a challenge It can be a challenge.” The best strategy is to strengthen local industrial capacities and strengthen international cooperation to achieve a balance and take advantage of growth opportunities on the world market.
chinese manicure
From Berlin, economist Dr. Najeh Al-Obeidi says in exclusive statements to Sky News Arabia Economy website, that Europe has already started cutting China’s nails, and it’s showing in the industry electronic chips, as the European Union has allocated 43 billion euros to support this industry until 2030 and reduce dependence not only on China but also on Taiwan and the States -United of America. The foundation stone for chip factories has already been laid in Germany, and the aim is to raise the European Union’s share to 20% in this sector.
The economist points out that “there are similar projects for the semiconductors and batteries needed for electric cars, and finally Ford has inaugurated in the German city of Cologne the first electric car factory in Europe, worth almost two billion euros”.
In this context, the aforementioned Cushman report referred to the plans of Mercedes-Benz, which recently announced the construction of its first factory dedicated to electric trucks in Poland, in addition to BMW’s plans to increase the production of automotive batteries in a new factory in Hungary. In particular, he said, Central and Eastern Europe, where labor is relatively cheap, has seen “significant investment in manufacturing”.
Al-Obaidi added: “China felt this and changed its strategy by reducing acquisitions of existing companies due to European reservations about it, and moving towards establishing new companies in Europe.” , explaining at the same time that “Europe wants to follow a clear approach with China, but not a confrontational approach. “With Beijing, which will remain a trade partner and competitor, as well as an adversary which offers an alternative system… Europe is learning from its experience with Russia after the war in Ukraine.”
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