Supporting access to finance in the EU at time of normalisation of the macrofinancial situation

This article discusses recent developments in corporate investments and financing conditions in the European Union (EU), with a view to understanding the pick-up in non-financial firm investment and in financial flows. While the rebound in investment activity and financial flows was supported by very accommodative monetary policy, progressively loose fiscal stance and specific policies targeting investment, such as the European Fund for Strategic Investment, many investment and financial bottlenecks persist. This is particularly the case in some countries and certain segments of firms. To highlight these gaps, we use the European Investment Bank Investment Survey (EIBIS). The survey provides an overview of the drivers and impediments to investment from a firm-level perspective. In this article, we focus on the financial environment. Taking account of both access to external finance and the tendency to be content to rely on internal financing capacity, the survey suggests that some economies, mostly in the periphery and cohesion groups, still face challenging conditions. Additionally, some specific types of firms, such as young, innovative and/or firms investing heavily in intangibles, as well as small businesses, are confronted with a more adverse financial environment. From a policy perspective, it remains to be seen how these developments will evolve in view of the expected normalisation of monetary policy going forward, while targeted intervention in highlighted segments seem to remain well justified. In addition, it follows from the analysis that structural impediments to financing investment are particularly critical. Hence, building a proper financial ecosystem in the EU remains crucial to support sustainable investment dynamics in the future, especially given the relatively low level of potential growth in the EU.