Good morning, Peter Vanham here in London.
“Stable yet underwhelming”. It was the expression used this week by the International Monetary Fund to describe its global economic outlook for 2025, with global growth expected to remain at 3.2 percent, and European growth hovering around 1 percent.
But at our Fortune CEO Forum, which we convened this week in London, “stable yet underwhelming” was perhaps also the best way to describe the mood among participants. The event included 40 leaders from European companies such as Nestle, Roche, Adecco, and Accenture.
We organized the Forum under the Chatham House rule, to allow for a frank exchange among participants on some of the most pressing issues facing Europe-focused companies. And that led to conversations we otherwise rarely hear from Fortune 500 leaders.
On AI and innovation, for example, most participants acknowledged that Europe would likely never catch up with U.S. and its well-funded startups like OpenAI when it comes to the creation of dominant large-language models and other AI architecture. The fragmentation and risk-adversity of available capital was seen as one barrier; the “overregulation” of AI and other technologies by the EU as another.
Only when the bulk of AI’s impact moves into applications half a decade down the line, would European companies be able to compete again, predicted one participant.
Yet participants also expressed that those classic barriers – regulation and lack of capital – were only part of the picture of Europe’s declining competitiveness. Fundamentally, many admitted, Europeans have a “mindset” problem, where their own ambitions simply don’t reach further than national or European scale, at most.
Yet it wasn’t all doom and gloom. Some participants saw a bright future in European companies' lasting ability to "premiumize" their products.
Two luxury companies – LVMH and Hermes – are among the top 5 of European companies by market cap. In an arena of declining competitiveness, the ability of European companies to grow and increase margins in product categories as disparate as wine or watches was seen as an example to follow.
And, as also became clear from the discussion in the room, European executives remain more committed than their US counterparts to embracing the green transition. It is one area where participants saw potential synergies between the EU’s more stringent regulation, and the general orientation of companies to decarbonize, and offer more sustainable and circular solutions.
More news below.
Peter Vanham
peter.vanham@fortune.com
