Europe faces the risk of prolonged economic stagnation over the next decade unless it significantly accelerates public and private investment, according to a new study by the McKinsey Global Institute. The report estimates that European economies require additional investments of around €1.2 trillion per year over the next five years to close the competitiveness gap with other regions and to double GDP growth rates.
This figure is 50% higher than the estimate included in the 2024 Draghi report, which pointed to an annual need of €800 billion, highlighting how quickly the investment gap between Europe and leading global economies has widened. Over the past five years, US companies have invested roughly €2 trillion more than European firms in digital technologies. Between January 2024 and September 2025 alone, the annual gap reached €580 billion in corporate investments and exceeded €300 billion in start-up and scale-up funding. At the same time, China invests three times more than Europe in traditional manufacturing industries.
Productivity, investment, and a potential turnaround
Without a strategic shift, Europe risks average economic growth of just 1% per year, constrained by low investment levels that limit aggregate demand and productivity. In an alternative scenario, where leading European companies match US investment and R&D spending levels, Europe’s economic growth rate could double and household wealth could increase substantially, the study suggests.
The report also highlights that productivity gains often come from a relatively small group of exceptional companies. Between 2011 and 2019, more than two-thirds of US productivity growth came from just 44 companies, while in Germany it came from 13. European success stories such as ASML, SAP, Siemens, and Novo Nordisk demonstrate how scaling technologies, innovating, and reshaping business models can drive performance. Despite the challenges, planned foreign direct investment in Europe has risen by 40% compared with the pre-pandemic period, while private equity funds mobilized around €300 billion in the first nine months of 2025.
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