The size and depth of EU capital markets in a global context

Our latest analysis of capital markets in the EU shows that the depth of capital markets financing relative to GDP in the EU is increasing: in particular venture capital investment but also retail investment and pension assets have grown and today better support the European economy than 10 years ago. At the same time, the overall size of the EU’s financial markets relative to peer economies around the world is shrinking.

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Taking stock

This is New Financial’s 12^th report on the size and depth of banking, finance, and capital markets in the EU. Much has changed since our first analysis back in 2015, most of all the political awareness and focus at the EU level and in member states on the benefits that bigger and better capital markets in Europe can bring. Some things have not changed all that much, however: EU capital markets on the whole are still less developed than the US and the UK, and their growth is welcome but could do with significant acceleration.

In this report, we analyse EU financial markets through two lenses: first, we measure the absolute size of international and domestic financial and market activity in the EU in a global context; and second, we calculate the depth of capital markets relative to the size of the European economy. This gives us two distinct but connected readings of the state of play in European markets, and we hope it will provide a useful contribution to the debate in Europe.

The good news is that the value of capital markets financing in the EU relative to GDP is increasing, albeit slowly. The European economy overall is starting to make more use of market-based financing to support investment in jobs, innovation, and economic growth. The bad news is that the overall size of the EU’s financial markets relative to other economies worldwide is shrinking.

Here are 10 highlights from our research:

1. A new perspective: this report analyses banking, finance, and capital markets in the EU in three different ways that each provide slightly different perspectives. First, the total value of international financial markets activity that takes place in the EU; second, the total value of domestic financial activity; and third, the value of capital markets activity relative to GDP.

   
   

2. A global financial centre: in a hypothetical scenario in which the EU were a genuinely unified single financial market, it would be the second-largest hub for international banking and finance activity, well behind the US but just ahead of the UK. The EU is the largest global centre for cross-border banking.

   
   

3. A domestic engine: in the same scenario, the EU would be the third-largest market in the world for domestic banking and finance activity, behind the US and China but well ahead of Japan. The EU is the largest market for domestic ESG bond issuance and sustainable loan activity.

   
   

4. Losing ground: EU financial markets are growing in absolute terms, but they are growing more slowly than many of their peers and going backwards in relative terms. The EU’s weighted share of global international financial activity fell by 3% from 2015 to 2025, and its share of global domestic financial activity fell by 28%.

   
   

5. Supporting the European economy: relative to GDP, capital markets financing in the EU overall has increased by 13% from 2015 to 2025. The EU’s asset management sector is nearly a third deeper and private markets financing has almost doubled, but the depth of debt capital markets in the EU has decreased by 5% and equity markets activity relative to GDP in the EU has shrunk by more than a quarter.

   
   

6. Financing growth: the value of venture capital investment in the EU has more than doubled relative to GDP over the past decade but it is still a long way behind the US (where total VC activity is more than six times larger relative to GDP). Early-stage VC has grown much faster than later-stage investment, which suggests start-ups are still running into problems when they scale and try to access larger rounds of financing. The value of growth market IPOs by EU companies has collapsed relative to GDP.

   
   

7. Large member states are not pulling their weight: of the eight largest EU economies, only France has seen double-digit growth in the depth of its capital markets from 2015 to 2025. Market-based financing in the Netherlands and Germany has only grown by 4% relative to GDP; Belgium and Poland have stagnated; and the depth of capital markets financing in Italy, Ireland, and Spain has decreased (!).

   
   

8. A structural shift: the value of long-term capital in the EU has increased at a rate of about 1.8 percentage points relative to GDP every year from 2015 to 2025, which means that the pool of capital that could potentially be used to support the European economy is growing. Retail investment in particular is starting to play a more significant role in how European savers engage with their money. In the UK, on the other hand, households today invest less of their money than they did in 2015…

   
   

9. A closer look at member states: bigger and better capital markets in Europe require commitment and action by individual EU member states. The good news is that there are some very good examples to follow within the EU: relative to GDP, Denmark has a bigger funded pensions market than the US, Estonia more early-stage VC investment, and Sweden a larger asset management sector.

   
   

10. Further reading? Our dataset allows us to take a closer look at the size, depth, and evolution of capital markets in any country in Europe. We invite market participants or policymakers who would like to see more detail on a particular European economy to get in touch with us.