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A renewed vision for EU capital markets

by Christopher Breen, Maximilian Bierbaum, and William Wright

January 2024

EU capital markets

Update of our analysis of the state of play and growth potential in EU capital markets.

This report paints a renewed and ambitious vision for EU capital markets and identifies the potential for game-changing growth to support investment, innovation, and prosperity.  We estimate that an additional 4,400 companies in the EU could raise an extra €470bn every year in the capital markets, and that an additional €12tn in long-term capital could be put to work in the EU economy to help boost sustainable growth. 


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In the debate on the future of EU capital markets it can be easy to focus on the downside: that they are relatively small, fragmented, and under-developed. This report focuses instead on the upside and outlines both the huge growth potential in EU capital markets and highlights the potential benefits of deeper capital markets to EU citizens, companies, and the wider economy in concrete and practical terms.


Instead of a rhetorical debate, we translate this growth potential into concrete terms: how many more companies in each country could potentially access the capital markets, and how much more money would they be able to raise?


To pick one example: we estimate that around 475 additional companies in Germany could benefit from an additional €9bn in venture capital each year. Another way of looking at this is that every year 475 high growth companies in Germany are not getting that investment today.


The highlights of the report include:


  • A renewed vision: there is a big opportunity to refocus capital markets union on a smaller number of key challenges. We identify five structural forces that could shape that vision.

  • Game-changing growth potential: we analyse the huge but realistically achievable opportunity for growth in selected sectors of EU capital markets and in selected countries. We estimate that an additional 4,400 companies across the EU could raise an extra €470bn every year in the capital markets - nearly doubling current levels of activity.

  • How to get there: we outline a roadmap of how to accelerate growth based on a combination of ‘top down’ EU-wide measures to encourage harmonisation and ‘bottom up’ national measures to increase capacity.


With a busy election year ahead and a new European Commission and European Parliament coming in 2024, we hope the report helps stimulate debate and inject a greater sense of urgency and ambition across the EU to develop bigger and better capital markets.


Here is a short summary of this report:


1) A bigger role: this report outlines a bold and ambitious vision for capital markets across the EU. It highlights the potential benefits of deeper capital markets to the EU economy and national economies and shows the huge potential for growth in capital markets in each country.


2) A renewed vision: with a new European Commission and European Parliament coming in 2024, there is a big opportunity to refocus capital markets union on a smaller number of key challenges. Five structural forces that could shape that vision include i) consolidation of supervision ii) a ‘bottom up’ approach iii) the transition to net zero iv) consolidation of market infrastructure v) digitisation and technology.


3) Game-changing growth: there is huge potential for growth in capital markets across the EU. We estimate that an additional 4,400 companies in the EU could raise an extra €470bn every year in the capital markets - nearly doubling current levels of activity. This growth (and any progress towards it) would reduce the reliance of the EU economy on bank lending, drive innovation, and boost investment in jobs and growth.


4) A more sustainable future: our analysis shows the potential to transform pools of long-term capital (pensions and insurance assets) that the EU needs to provide for a more sustainable future. An additional €12tn in long-term capital could be put to work in the EU economy - roughly double today’s levels - with the average value of long-term savings per household rising from around €69,000 today to €128,000.


5) Ringing the bell: there could be an additional 230 IPOs in the EU raising an additional €40bn in capital every year. Italy could see an additional 95 companies that go public every year; the emerging EU (including Poland, Hungary, and the Czech Republic) an additional 45 companies raising €4bn per year.


6) Fuelling the growth economy: the EU does not have a start-up problem but it does have a problem channelling investment into high potential companies that drive job creation. We estimate that 3,245 additional companies in the EU could benefit from an extra €41bn in venture capital funding every year, nearly double current levels, and the number of companies listed on growth stock markets could quadruple.


7) Five big challenges: in the coming decades the EU will need to i) successfully transition to net zero ii) better support innovation and growth iii) give companies better access to more sources of funding iv) support an ageing population v) secure and advance its role on the global stage. These challenges are complex but present a once-in-a-generation opportunity to transform the lives of millions of EU citizens.


8) Not quite there yet: more developed capital markets are not the obvious answer to all of the challenges the EU is facing, but the EU will not be able to address its biggest challenges without them. Relative to GDP, EU capital markets have grown by nearly 50% since 2014 and are deeper than ever, but they are still not as developed as they could or should be.


9) The global perspective: one of the most concerning but often overlooked developments in EU capital markets is that they are shrinking in a global context. The EU’s share of global activity has fallen from 18% in 2006 before the financial crisis to just 10% today. In the longer term, without urgent reform, the EU’s share will shrink to single digits.


10) A new sense of urgency: to build bigger and better capital markets, member states, EU authorities, and the wider banking and finance industry should focus on i) building deeper pools of long-term capital ii) rethinking the supervisory and regulatory framework iii) simplifying market infrastructure iv) ensuring the EU’s international competitiveness and attractiveness v) embedding political support across the EU.

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