The services revolution : industrial policy for a modern economy

The services sector is vital for job creation, economic growth, and resilience in Europe. It is the largest and fastest-growing part of the European economy, accounting for around 70% of the EU's GDP and employment. The EU is also the world's largest exporter and importer of services. Europe is a service economy. Despite its importance, the services sector is performing well below its potential. Regulatory burdens and red tape are significantly more extensive for services than for goods. Moreover, the services sector is often overlooked in the European policy debate. Many politicians today advocate for reindustrialization, often through political means such as industrial subsidy schemes that favor the production of chips or batteries. However, this push to restore manufacturing risks coming at the expense of the services sector and may ultimately harm European competitiveness. As this report will show, no wealthy country has achieved further prosperity through reindustrialization, while all advanced economies have grown richer by embracing the servicification of their economies. The purpose of this report is to demonstrate that the future lies in services - not in politically driven reindustrialization. Through economic analysis, EU-US comparisons, and economic simulations, we conclude that Europe stands to gain significantly by removing barriers in the services sector. Eliminating trade barriers for services could boost European GDP by 280 billion Euros over five years - equivalent to a 1.6% increase in growth. In an increasingly uncertain world - with war on our continent and a trade war across the Atlantic - Europe must adopt an open, market-oriented policy framework that unlocks the potential of the services sector to restore competitiveness. This is not only essential for job creation and productivity but also for strengthening resilience through robust value chains. The time to act is now - Europe cannot wait.