Two-thirds (66%) of business leaders globally are optimistic that the European market will make a relatively fast recovery from the economic downturn caused by the COVID-19 pandemic, according to a new report from Accenture.

The report, entitled “Bold Moves in Tough Times” and based on a survey of nearly 500 C-level executives in Europe, North America and Asia-Pacific across 15 industries, found that approximately three in 10 respondents (29%) expect the recovery in Europe to be fairly rapid (“V-shaped”), while 37% anticipate a slower, but steady, “U-shaped” recovery in the next 12 months.

The most optimistic sector is pharmaceuticals/biotech/life sciences, with 34% of business leaders in that sector expecting an increased demand in Europe as a result of the pandemic. The second-most-optimistic sector is communications, media & entertainment, with 52% of those respondents expecting a V-shaped recovery in their European markets, followed by insurance, at 47%. At the other end of the spectrum are the automotive and airlines/travel/transportation sectors, with only 7% and 12% of respondents, respectively, expecting a rapid recovery.

The report also reveals that executives expect the German, Nordic and U.K. economies to rebound the fastest from the downturn, followed by France, Spain and Italy. In addition, European business leaders are optimistic regarding Europe’s competitiveness, as four in 10 respondents (39%) believe that European companies will be more competitive vis-a-vis their U.S. peers than they were before the crisis, and even more (43%) believe that European companies will be more competitive compared with Chinese businesses.

“Confidence is critical in the current economic environment, which is still volatile and uncertain,” said Jean-Marc Ollagnier, CEO of Accenture in Europe. “The optimism regarding Europe’s economic recovery and competitiveness offers European companies a unique opportunity to reinforce their leadership and close the gap with their American and Asian competitors. However, this will depend on how well they translate optimism into bold actions. The biggest risk is that European business leaders remain over-reliant on government support, stay on the defensive and underinvest in game-changing innovations — because their global competition won’t wait.”

Accenture’s research indicates that there is a risk that executives in Europe are overly cautious regarding how they prepare for the rebound, compared with those in North America and Asia-Pacific. Specifically, European executives appear to be:

• Focusing on incremental rather than game-changing innovation: More than half (53%) of European respondents said they are slowing investments in innovation and won’t relaunch any initiatives in the next six months, compared with 33% of respondents in North America and 49% in Asia Pacific.
• Underinvesting in the future of business: In Europe, only about one in seven companies (16%) is already investing in initiatives to prepare for the rebound, compared with one in four (25%) in Asia Pacific and one in three (34%) in North America.
• Less likely to collaborate to rebound: Business leaders in Europe are slightly less likely than those in North America and Asia-Pacific to collaborate with other companies to mitigate the impact of the crisis and rebound faster (48% of those in Europe, compared with 53% in North America and 55% in Asia-Pacific).

“Europe’s business leaders must start reinventing themselves for the post-COVID-19 world today,” Ollagnier said. “Now is the time to think and act differently and take balanced risks to build long-term resiliency and to renew growth models to adapt to what we call a ‘never normal’ world.”

The report highlights critical areas that European companies need to focus on to close the competitiveness gap with their North American and Asian peers. These include:

• Increasing the pace and scope of digital transformation: Companies that have been the most resilient during the pandemic have the most-advanced digital capabilities, enabling them to equip their workforces for remote working, adjust their supply chains and adapt to new ways of buying — quickly and at a massive scale. European executives now clearly see the need to turn up the speed on digital change, as nearly two-thirds (63%) said their companies will accelerate their digital transformation, including their use of cloud.
• Creating experiences for increasingly responsible consumers: Buying habits during the COVID-19 lockdown ― with consumers making more-responsible purchases and massively shifting to online channels ― will remain in the post-pandemic world. Therefore, companies will need to deliver an end-to-end customer experience — one that brings customers in early, during the innovation stage, and continues through the sales and service processes. Nearly two-thirds (62%) of European business leaders in a group of consumer-related industries see opportunities to build on buying habits that are increasingly driven by social and environmental criteria.
• Leveraging technology to reinvent the industrial sector: COVID-19 has triggered debates about the need for businesses to bring their operations back to their home markets. However, “re-localization” might not be the panacea for the European “industrial renaissance.” To build long-term operational resilience, reinvent their business models and create new revenue streams, businesses must leverage advanced digital technologies, such as predictive modelling, digital twins, and edge computing, among others. With 42% of European respondents in the manufacturing sector planning to accelerate investment in digital transformation, compared with just 32% and 30% in North America and Asia, respectively, there’s an opportunity for European companies to take the lead in the industrial sector.

“Europe is at a crossroads; its business leaders can continue down the well-trodden strategic and operational paths, or they can explore a new way forward, one based on innovation and high-potential technology that blends with Europe’s traditional strengths of sustainability, solidarity and purpose,” Ollagnier said. “Difficult though the COVID-19 pandemic has been, as we emerge from it the scale and scope of new opportunities — particularly in the industrial sector and on energy transition issues — are clear. It’s time for Europe to make bold moves and seize those opportunities to finally close the competitiveness gap.”