At a country level, France is leading other European regions, with four-fifths (80%) of CEOs planning to improve their investment in R&D and capex in 2024 as they look to channel their companies’ profits back into the business. EY analysis of the top 100 French companies by market capitalization shows that nearly 80% have increased their estimated investments in capex as a percentage of sales over the last year. Investment varies across sectors, with major activity happening in sectors such as life sciences, industrials and consumer as companies continue to invest in new products, services and process technologies.
The government’s France 2030 investment plan³ provides support for industrials and deep-tech startups in terms of innovation, employment and strategic independence on innovative products. In addition, Innovation Santé 2030, the health component of the investment plan, aims to provide companies with a strategy to help France become the leading European nation in terms of innovation and sovereignty in health.
In the UK, three-quarters (75%) of CEOs are signaling a return to higher levels of investment across the board as uncertainties around monetary policy decrease. The Bank of England recently paused its rate hike cycle, leaving interest rates at a 15-year peak, and has hinted it will maintain the statusquo. With markets now accepting a higher-for-longer rate environment, inflation pressures recede and the growth outlook becomes clearer, even if at lower levels.
Transactions remain stable, with potential for an uptick
M&A activity is expected to continue at a stable, albeit lower, path. Heading into 2024, there could also be an uptick in more significant deals, as CEOs become more comfortable with the new macroeconomic environment. A clear majority of European CEOs (87%) plan some form of transaction over the next 12 months. However, there has been a sharp contraction in intentions to actively pursue acquisitions in that timeframe, dropping from 56% (vs. 59% globally) in July to 29% (vs. 35% globally) in October. The focus is now on joint ventures (JVs), strategic alliances and divestments, with more than two-fifths of European CEOs indicating a desire to reassess portfolios, boosted by the reopening of initial public offering (IPO) markets.
Despite interconnected issues creating an uncertain near-term environment, CEOs remain keen to invest to reshape their business. There is a clear recognition among CEOs that the new environment requires enhanced investment across verticals, in addition to tech and AI capabilities. To stay ahead of the competition, CEOs need to make hard choices to fix, sell or close unprofitable parts of the portfolio, or to exit particular markets. In addition, while businesses recognize the challenges and issues associated with the adoption of AI, it is essential for CEOs to make sure they have a sound AI strategy that caters to all aspects related to talent, science, tech and regulation.