Europe is lagging behind the United States in terms of competitiveness. The verdict is clear but not irreversible. Nearly two years ago, reports by Mario Draghi, former president of the European Central Bank, and Enrico Letta, president of the Jacques Delors Institute, sounded the alarm about Europe’s decline, calling for sweeping reforms and a major €800 billion investment plan. In a report published for the Rencontres Économiques d’Aix-en-Provence economic forum, the McKinsey consulting firm now estimates that public and private investment needs will total 1.2 trillion per year over the next five years.
Over the past five years, illustrating the extent of the accumulated lag, U.S. companies have invested 2 trillion more in digital technologies than their European counterparts. The competitiveness gap has widened significantly, according to the authors, who cite the average performance differences recorded between 2015 and 2024: Revenue growth for the largest U.S. companies was 1.8 times higher, and their market capitalization was 3.1 times greater. The urgent priority, McKinsey writes, is to restart Europe’s productivity engine, allowing it to boost competitiveness. “What matters is not so much the amount of investment as its allocation to the companies most likely to improve overall productivity,” says Tunde Olanrewaju, managing partner for Europe.
France’s leading companies are more productive
In fact, Europe lags significantly behind the United States in productivity, with the gap estimated at 33% in 2023. Over the 2018-2025 period, productivity grew 2.1% annually in the United States, compared with 0.7% in Germany, 0.6% in the United Kingdom, and 0.2% in France. McKinsey, however, highlights a rebound in France over the past two years.
“The main difference with the United States stems from the dynamism of companies,” Olanrewaju says. “They have benefited from the emergence of major new tech players. This has obviously led to significant growth in average productivity because these companies generate significant leverage.” Another key point: “It is not just about cutting costs but about expanding business, opening new markets, creating new products, raising prices and thereby achieving net growth,” he says.
In France, 90% of productivity gains are linked to the growth effect, compared to an average of 60% in other countries, and are concentrated among the 53 top-performing companies. This concentration is prevalent across Europe, where 0.2% to 5% of companies account for up to 80% of productivity gains. This outperformance is primarily driven by long-established industry leaders, whereas in the United States, McKinsey notes greater “turnover” among companies, featuring what it calls “disruptors,” young, innovative firms that have made major breakthroughs, or “scalers,” which have rapidly expanded in size.
Daniele Chiarella, managing director of McKinsey France, highlights the performance of the 53 French champions, saying they are “superior even to German and British companies, and in some respects closer to leading American companies. This finding, which may seem counterintuitive, can be explained in particular by their greater internationalization and the effectiveness of their growth strategies.”
Spanning some 20 sectors, the strongest productivity gains are found in the luxury goods, telecommunications and insurance sectors. However, France has no disruptors. “France is struggling to help SMEs grow into large companies,” Chiarella says. “No French SME has managed to rise to the ranks of the largest publicly traded companies in the past 25 years. By comparison, 5% of Italy’s current largest companies, 10% of Germany’s, and 17% of those in the United States were SMEs between 2000 and 2025, which represents a significant opportunity to foster the next generation of high-performing companies.”
Economies of scale
To accelerate this catch-up process, companies must focus on high-growth sectors. McKinsey has identified 18 such sectors, ranging from e-commerce to next-generation nuclear power, including artificial intelligence, cloud computing, cybersecurity, the space industry, electric vehicles, robotics and biotech.
“Already generating $4 trillion in revenue, these sectors are growing at a rate 10 times faster than the rest of the economy,” according to the report. Yet Europe accounts for only 8% of the global market share in these future-oriented industries. “Traditional” companies can transform themselves, following the example of Schneider Electric — which specializes in electrical equipment and is expanding into software and services — or Michelin, which offers integrated fleet management solutions.
McKinsey highlights two drivers of progress. First, Europe must reduce the excessive fragmentation affecting many industries, particularly in the space and defense sectors. Signs of consolidation are gradually emerging, such as the preliminary agreement among Airbus, Leonardo and Thales. Europe must also, of course, develop generative AI, which, when combined with other automation technologies, could add up to 3.4% to annual global productivity growth by 2040.
