Putting our continent on the global scale
A unified European capital market requires streamlined EU-wide rules and supervision, dismantling national barriers to support cross-border investment and empower public backing for EU businesses.
We must create the conditions for every fund in the EU to behave, if it wishes, as a European fund, subject to European rules and European supervision without the hindrance of national barriers.
We must strengthen the role of European authorities in removing technical barriers that prevent cross-border activities, including unnecessary reporting burdens.
We must increase our ability to incentivise EU businesses to remain in the Union.
We must be ambitious in creating a tax rulebook that incentivises cross- border investments within the Union.
Today our Union is better at financing innovative seed projects than at reaping the benefits of these investments when they reach a critical size. While we are good at promoting start- ups, scale-ups are leaving Europe as they are typically unable to receive growth capital from larger EU managers.
EU funds are too small in large part because they must operate in a fractured environment with differences in taxation, remaining single market barriers or diverging implementation of EU rules. At the same time, public finance has so far fallen short of providing the necessary funding and incentives to support larger businesses at a time when they are considering moving outside Europe.
This is why our focus should be put on actions that ensure businesses can operate across EU borders and beyond.
Priority 4
Complete the Capital Markets Union
Priority 5
Leverage existing funding initiatives and create an EU Champions Fund
Priority 6
Secure tax policies that are simple to adhere to, promotes growth and incentivises cross-border fundraising & investments
Priority 4
Priority 5
Priority 6
Priority 4
Priority 5
Priority 6
Complete the Capital Markets Union
Theoretically, existing EU passporting rules should offer fund managers the ability to market across EU borders easily. Yet, the positive effect of this passport remains limited as managers continue to face a series of barriers, whether these are cumulative fees charged by host authorities, or divergences in implementation and supervision.
In 2023, only 30% of all fundraising in EU27 countries was cross border, despite existing rules at EU level allowing the free flow of capital.
All of this ultimately makes cross-border fundraising much harder than it could be, with the consequence of maintaining the average size of EU funds at a much lower level than in the United States and making EU funds less able to support our own scale-ups.
Size matters: Venture capital fund size in the EU is 22% lower than in the US on average.
Required changes
- Map existing legislative or monetary barriers that prevent managers from operating cross-border.
- Introduce the opportunity of opt-in EU supervision for funds that wish to have a European strategy.
- Give European Supervisory Authorities a new structure and additional tools to tackle existing barriers.
- Widen the existing venture capital regime (EuVECA) to allow all venture and growth funds supporting start-ups and scale-ups to operate more easily cross-border.
Success criteria for EU economy
By 2029, increase the percentage of intra-EU cross-border fundraising from 30% to 50%.
Leverage existing funding initiatives and create an EU Champions Fund
The EU has taken big steps in recent years to provide greater amounts of funding that help European companies to grow, both directly through grants and Horizon Europe funding streams, and indirectly by supporting venture and growth funds through the European Investment Fund.
However, most of these products, including the recently launched EIC Fund, have too small ticket sizes to truly allow EU businesses to support scale-ups. They are also too complex to be used easily (contrary to systems set up elsewhere). This contributes to the trend of European companies, en route to becoming European champions, opting to grow in the US, rather than at home.
Winner takes it all: There are 2.5 times more Spotify jobs in the US than there are in Europe, despite Spotify being a European founded firm.
Based on already existing initiatives, such as the laudable ETCI, we should mobilise more capital from more countries towards the large end of the innovative market, offering European champions better opportunities to keep the EU as their home, while continuing to support smaller structures. This would help the continent support its core strategic sectors, including the digital and energy sectors, as well as to invest in its own sovereignty.
Required changes
Develop the ETCI into an EU “superfund”.
Devote new own resources mechanisms to support innovation at EU level.
Create a one-stop portal for all EU funding to facilitate application and leverage synergies between funding mechanisms.
Provide more support through tax incentives and equity (i.e., operational expenditure as opposed to capital injections) in the same way as the United States has done with the Inflation Reduction Act.
Secure tax policies that are simple to adhere to, promotes growth and incentivise cross-border fundraising & investments
We should create a taxation policy that is simpler, clearer, and reduces any cross-border tax frictions, with the golden standard being applicable across all Member States.
What businesses truly need is a taxation policy that is easy to comply with, fosters growth, and encourages cross-border fundraising and investments. We need to eliminate tax disparities and challenging processes, e.g., on refunds of withholding tax.
By implementing innovation and investment focused tax policies, we can create a business environment that encourages both local and international investors to participate in the European economy. This will not only drive economic expansion but also strengthen our position in the global market.
Required changes
Create best practices for tax incentives for venture capital at the Member State level.
Develop an ambitious and simplified uniform withholding tax system, which at the same time respects the rules of tax neutrality.
Protect exemptions from withholding tax under existing taxation rules (e.g., the Parent-Subsidiary Directive and the Interest and Royalties Directive).
Introduce standardised EU-pooling vehicles and treaty-accessible Special Purpose Vehicles.
Download the full publication
Explore our 12 priorities
Priority 1: Take down barriers that prevent pension funds and insurers from financing our digital and climate transition
Priority 2: Redirect EU citizens’ savings to productive asset classes through changes to EU passport and reporting requirements
Priority 3: Attract foreign capital to the Union
Priority 4: Complete the Capital Markets Union
Priority 5: Leverage existing funding initiatives and create an EU Champions Fund
Priority 6: Secure tax policies that are simple to adhere to, promote growth and incentivise cross-border fundraising & investments
Priority 7: Develop a programme of EU regulations to promote talent mobility and the digitalisation of Europe
Priority 8: Reshape EU company law to incentivise equity investments
Priority 9: Develop a flexible, opt-in EU insolvency law on top of the existing EU-wide rules
Priority 10: Ensure there is a straightforward, seamless, and compatible EU sustainability disclosure framework
Priority 11: Attract private capital finance to the EU’s most critical sectors, from infrastructure (digital, climate, transport, energy) to defence
Priority 12: Improve the cross-border EU investment environment
Find out more
Policy
More about our Public Affairs team's work
Success stories
Explore success stories from across the industry
Key policy areas
Key policy areas for private equity and venture capital