Europe's technology Industries in 2018 - Economic Outlook

EUROPE' S TECHNOLOGY
INDUSTRIES IN 2018

O rgalim represents Europe’s technology grew in 2018, but at a lower rate than in 2017. Investment
industries: companies that innovate at was also on the rise, but at a lesser pace than previously.
the crossroads of digital and physical Moreover, the automotive industry, a major client of the
technology – specifically the branches technology industries, saw slower growth in the number of
mechanical engineering, electrical new passenger car and commercial vehicle registrations.
engineering, electronics and ICT, and
metal technology. These diverse industries are home The investment growth in European industry will continue
to companies of all sizes, from small and medium-sized to be positive, following a period of underinvestment
enterprises to large corporations. Together, they form the between 2009-2012 compared to the period before the
EU’s largest manufacturing sector and are responsible for economic crisis of 2008. Since then we have been seeing a
one third of the EU’s manufactured exports. Our industries slight upswing in European industrial investment figures.
develop and manufacture the products, systems and
services that enable a prosperous and sustainable future. Uncertainty surrounding certain risks also had a negative
effect on growth. Many risks are policy driven, and
Economic outlook: modest growth these are increasing costs for companies and decreasing
expected in 2019 willingness to take a chance on investment decisions. For
instance, there is concern within the technology industries
Orgalim’s economists compile and analyse the latest data that the consensus that free trade is beneficial for all sides
and forecasts of the technology industries twice a year, is diminishing. For export-oriented sectors like ours, this
specifically analysing economic trends in metal products, could put long-term growth and employment prospects
mechanical engineering and electrical engineering, in danger. Examples of issues that would undermine free
electronics, ICT & instruments (mainly chapters 25 to 28 trade are Brexit, the prospect of a US-China trade war, or
and 32.5 of the NACE rev.2 business nomenclature), as well US-EU trade tariffs instead of a US-EU trade agreement.
as the installation and repair services sector (chapter 33 of The effects of risks like these still put a serious brake on the
the NACE rev.2 business nomenclature). global and European growth motor.

Based on the available official data, the technology Annual change in output (current
industries’ total turnover value in the EU reached about prices) of Europe’s technology
€2,102 billion in 2017, of which €170 billion was generated
in installation and repair services.* Employment totalled industries (year-on-year growth in %)
11.15 million people, of whom 1.3 million were working in
installation and repair services.

Soft landing expected: output up SECTOR / YEAR 2018 2019
3.0% in 2018 and set to grow by
2.0% in 2019 Mechanical engineering +3.5 +2.5
and installation & repair +2.0
Activity in the industries represented by Orgalim grew by
5.0% in 2017. During this period the European economy Electrical engineering, +2.5
was close to overheating, with the first signs of slower electronics and ICT
growth becoming clear.
Metal technology +3.5 +1.5
The main reason for this slowdown in 2018 and 2019 was
a deceleration in growth in the world in general and in the Technology +3.0 +2.0
EU in particular. GDP growth decreased slightly in most industries total
industrialised countries, as the negative effects of the very
good business cycle situation in 2017 became gradually *Please note that all past figures given here are based on data
visible: very high utilisation rates of production capacity, available at the time of estimation; all future data are forecasts
lack of technical and digital skills in large parts of the based on currently available data.
industry, and last but not least a higher upward pressure
on wages, which had a negative impact on the global
competitive position of our industry.

Output in European industry and in the construction sector

Turnover value Employment

€ billion, approx. 2,208 million, approx. 11.45

+2.0% 2019

2,165 2019 11.37

+3.0% 2018

2,102 2018

+5.0%

2017

1,977 1,997 11.15

+1.3% +1.0% 2017
2015 2016
10.99
10.96 2016

2015

Employment: almost 600,000 new labour is not due to fluctuations in the business cycle, but
jobs created between 2014 and 2019 rather is a structural problem that is evident even when
labour demand is shrinking. Growth in 2018 could therefore
Employment grew rapidly in 2018, by 2%: all in all, the have been higher and unemployment much lower if labour
number of jobs increased by 220,000. This marked the markets had been able to supply enough skilled workers.
fifth consecutive year of rising employment in Europe’s
technology industries: the growth rate stood at 1.2% in Mechanical engineering
2017, 0.3% in 2016, 0.7% in 2015, and 0.3% in 2014. Our
economists expect this trend to continue with an estimated European mechanical engineering accounted for annual
rise of 0.7% in 2019. In some parts of the technology turnover of around €720 billion in 2017. Employment is
industries, notably the metal technology industry and estimated at 3.0 million people.
mechanical engineering, the increase could even be close
to 1.0%. In 2018 and 2019, slightly above average growth in turnover
is again expected (3.5% in 2018 and 2.5% in 2019), making
Aggregating the employment figures, Europe’s technology mechanical engineering the strongest growth sector in the
industries will have created almost 600,000 jobs in the technology industries.
period 2014-2019.
Mechanical engineering is benefitting from the recovery of
However, most Orgalim member associations report a European industry in general since early 2013, as European
severe lack of skilled workers – although the business industrial output and investment figures are strongly rising
cycle is pointing downwards, meaning overheating in following an enormous investment gap between 2009
labour markets should come to an end. This leads to the and 2012.
conclusion that in most countries a shortage of skilled
Although demand in this industry remains stable,
companies fear that growing protectionism in world

Annual change in employment in However on the whole, the downward risks are much bigger
Europe’s technology industries that the upward opportunities.

(year-on-year growth in %) Electrical engineering, electronics
and ICT
SECTOR / YEAR 2018 2019
The electrical engineering, electronics, ICT and instrument
Mechanical engineering 2.3 0.8 industries employ more than 3.1 million people (including
0.3 medical and dental industries), accounting for an annual
Electrical engineering, 1.6 0.9 turnover in 2017 of around €700 billion.
electronics and ICT 0.7
Steady growth is expected in this sector of 2.5% for 2018
Metal technology 2.1 and 2.0% in 2019. This follows tremendous growth of 5.5%
in 2017.
Technology 2.0
industries total Like mechanical engineering, this industry also stands to
benefit from the digital transformation and the evolution
markets could harm export potential in 2019. The modest towards Industry 4.0 across the globe. Robotisation and
positive forecasts for 2019 can be maintained if no automation projects are being undertaken in all regions and
additional export tariffs are imposed due to trade conflicts all sectors. Furthermore, this industry offers solutions to
between countries. societal challenges in areas like sustainable energy, mobility,
security and an ageing population.
Technological trends such as digital transformation
(artificial intelligence, big data, IoT), climate protection or Metal technology
energy systems transformation will bolster growth this year
and in the years to come. Turnover in the fabricated metals and metalworking
industry was estimated at around €512 billion in 2017. In
Investment in further automation is necessary while there terms of employment this is the largest branch of Europe’s
is a shortage of skilled labour and growing labour costs not technology industries, employing 3.75 million. To a large
only in the mechanical engineering sector itself but also in extent, this sector produces inputs and products used
customer industries. in the construction industry and other sectors such as
machinery and automobile.
Despite lower growth rates in China, the ‘Made in China
2025’ initiative will provide further growth opportunities for In 2018 and 2019, this sector is expected to grow at almost
European mechanical engineering companies. the same pace as the average of the European technology
industries: 3.5% in 2018 and 1.5% in 2019. It is benefitting
from the recovery in the mechanical engineering and
construction industries and from spectacular growth figures
in automotive in recent years.

However, major concerns arise again from policy-driven
market disruptions. In the automotive sector, additional

EUROPE’S TECHNOLOGY INDUSTRIES

The technology industries represented by Orgalim cover charging infrastructures or building systems, to small
three main branches: mechanical engineering, electrical electronic devices such as medical monitoring equipment
engineering, electronics and ICT, and metal technology. or wireless smart home appliances, to micro and nano
technologies. Digitalisation and growing use of data are
Mechanical engineering: Companies in this industry enabling new offerings in areas like energy and resource
design and manufacture machinery and other mechanical efficiency, autonomous driving, electric mobility, and
systems – for everything from factory equipment, recycling e-health.
systems, logistics and materials handling to construction
equipment and vehicle components. Mechanical Metal technology: These companies play a crucial role
engineering firms have spearheaded the integration of as the foundation of the production chain that leads to
digital technology and data in their systems, automating high-tech manufacturing – whether by processing metal
processes and enabling connectivity across the value chain. for downstream use, producing specific metal parts or
products, or providing services such as surface treatment.
Electrical engineering, electronics and ICT: These In this industry, technological innovation and digitalisation
industries design and produce everything from large-scale are boosting efficiency in production and resource use.
electrical systems like power grid components, e-vehicle

restrictions on diesel engines planned in many countries are Moreover, a decline in car production in Europe is feared for
leading customers to postpone purchase decisions. Growing 2019. Finally, a shortage of certificates in emissions trading
protectionism in world markets – especially the US tariffs has already led to increased energy costs that impact the
on cars and car-parts – could harm the export potential of metal technology sector.
the fabricated metals and metalworking industry in 2019.

MECHANICAL 745 2018Turnover
ENGINEERING € billion, approx.

METAL 3.07 2018Employment
TECHNOLOGY million

ELECTRICAL 3.5% 2018 Growth
ENGINEERING,
ELECTRONICS 530 2018Turnover
AND ICT € billion, approx.

3.83 2018Employment
million

3.5% 2018 Growth

717 2018Turnover
€ billion, approx.

3.15 2018Employment
million

2.5% 2018 Growth

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Editeur responsable: Malte Lohan, Director General