The European Commission has recognised the existential risks faced by many of Europe's industrial sectors in its Spring Package, warning that 1.3 million jobs are at risk. However, the Commission's analysis is missing a major driver of the current crisis, namely profit maximisation. Mazzucato's new study fills this gap, providing the evidence needed for the Commission to act and make companies shoulder their responsibility to reinvest part of their profits in production, innovation and workers.

In the major new report Labour Squeezed, Investment Stalled, the renowned economist and a team at the UCL Institute for Innovation and Public Purpose analyse data from Europe's 300 largest publicly listed non-financial corporations, representing around 40% of EU GDP. The results show that falling investment and productivity are caused by the hoarding of profits and higher payments to shareholders and CEOs.

The report describes the emergence of a "capitalism of rent" in Europe, where income is increasingly captured not by producing anything, but by owning assets, financial positions and market power, and charging for access to them. Its authors conclude that Europe must switch from an economy based on value extraction to one based on value creation.

The report's key findings show that between 2000 and 2024:

• Net investment fell from 18.9% to 7.4% of gross profit;
• As a share of net profits, dividends and share buybacks more than doubled from 27% to 68%;
• Gross profits of large non-financial corporations grew by 151%, nearly twice as fast as pay, at 87%;
• In 69% of cases, firms that launched restructuring paid a dividend that same year;
• Europe has handed €3.5 trillion in public aid to its corporations, with almost no strings attached on where that money ends up.

Responding to the findings, ETUC General Secretary Esther Lynch said:

"This report shows conclusively that workers have been wrongly blamed for the bad decisions being made in Europe's boardrooms for decades.

"CEOs of Europe's biggest companies have effectively been asset-stripping our economy and then demanding cuts to real wages and working conditions to offset the damage. That has created a lose-lose situation where we have higher inequality and lower productivity.

"Further deregulation and attacks on workers will only make things worse. Europe cannot win a race to the bottom. Europe's path to success is through high-quality jobs, high investment and high productivity."

ETUC Confederal Secretary Ludovic Voet added:

"It is an absolute scandal that those complaining loudest about Europe's industrial decline are the very companies that engineered it. Twenty-five years ago, companies returned 27% of their profits to shareholders.

"Today, they return 68%—more than two-thirds of every euro of profit. Meanwhile, productive net investment has collapsed from €18.9 to just €7.4 for every €100 of gross profit. And while doing so, they launched 2,454 restructuring operations, with almost seven in ten of those companies still paying dividends in the very same year.

"This is the social cost of misdirected capital. When profits are extracted instead of invested, workers lose their jobs, wages stagnate, productivity suffers, and Europe's future is put at risk."

Judith Kirton-Darling, industriAll Europe's General Secretary, added:

"Europe's industry is facing a perfect storm created by geopolitical instability, the energy crisis and the challenges of the twin transition. Meanwhile, companies are trying to maintain business as usual, putting in place a cost-cutting strategy to maintain unsustainable double-digit profit margins. In the past, 'good' profit margins were focused on providing space for reinvestment in RDI and sites. Now, restructuring is announced if profits are not maximised at all costs.

"The European Commission needs to take this reality into account and make it expensive for companies to pursue short-term profit maximisation strategies, while pushing them to invest. Conditionality on public money is key to this, alongside an immediate crisis-response mechanism to tackle the ongoing crisis.

"You cannot fix the problem if the diagnosis is incomplete and partially wrong. Mazzucato's new study shows that deregulation is not the answer to the problems faced by Europe's industry. We need pro-worker industrial policy solutions, not a race to the bottom through deregulation."

IndustriAll Europe supports the ETUC's demands to EU leaders, while further calling for:

• A strong Quality Jobs Act that ensures fair transitions through adequate resources, skills development, training and quality employment, to maintain and create good jobs in Europe;
• An immediate crisis-response mechanism, including SURE-type employment protection and social conditionality on all public funds;
• A reform of energy policy to stabilise prices for industry and households;
• A proactive, long-term industrial policy aimed at mobilising large-scale public and private investment with social, employment and environmental conditionality in order to stimulate demand for Made in Europe products. Stronger internal demand goes hand in hand with higher wages through collective bargaining;
• Windfall profit taxation, alongside binding measures to prevent price gouging in energy and essential goods markets, with the revenue from such measures redirected towards public investment in the energy transition and in social protection.