Impacts of the COVID-19 pandemic on EU industries

1 Impacts of the COVID-19 pandemic on EU industries Policy Department for Economic, Scientific and Quality of Life Policies Directorate-General for Internal Policies Authors: Jan Maarten DE VET, Daniel NIGOHOSYAN, Jorge N EZ FERRER, Ann-Kristin GROSS, Silvia KUEHL, and Michael FLICKENSCHILD PE - March 2021 EN STUDY Requested by the ITRE committee Abstract The COVID-19 crisis has had a substantial impact on the EU27 economy and triggered unprecedented policy responses across Europe and the globe. With evidence on the effects on the EU industry manifested until the beginning of 2021, this report aims to address the following key is sues: (1) im pact of COVID-19 on the EU economy as a whole and across sectors; (2) im pa ct on strategic value chains; and (3) necessary recovery measures to meet the needs of the EU industry.

2 This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Industry, Research and Energy (ITRE). Impacts of the COVID-19 pandemic on EU industries This document was requested by the European Parliament's committee on Industry, Research and Energy (ITRE). AUTHORS Jan Maarten de Vet, Ecorys Daniel Nigohosyan, Ecorys Jorge N ez Ferrer, CEPS Ann-Kristin Gross, Ecorys Silvia Kuehl, Ecorys Michael Flickenschild, Ecorys ADMINISTRATORS RES PONSIBLE Matteo CIUCCI Fr d ric GOUARD RES EDITORIAL ASSISTANT Catherine NAAS LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR Policy departments provide in-house and external expertise to support European Parliament committees and other parliamentary bodies in shaping legislation and exercising democratic scrutiny over EU internal policies.

3 To contact the Policy Department or to subscribe for email alert u pdates , please write to: Policy Department for Economic, Scientific and Quality of Life Policies European Parliament L-2929 - Luxembourg Email: Manuscript completed: March 2021 Date of publication: March 2021 Eur opean Union, 2021 This document is available on the internet at: n aly s es DISCLAIMER AND COPYRIG HT The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy.

4 For citation purposes, the publication should be referenced as: de Vet, , et al. Impacts of the COV ID-19 pandemic on E U industries , Publication for the committee on Industry, Research and Energy, Po l icy Department for Economic, Scientific and Quality of Life Policies, European Parliament, L u xe m bourg, 2021. Cover image used under licence from ShutterstockImpacts of the COVID-19 pandemic on EU industries 3 PE CONTENTS LIST OF ABBREVIATIONS 5 L I S T O F BOX ES 7 LIST OF FIGURES 7 LIST OF TABLES 7 EX ECU TIVE S UMMARY 8 INTRODUCTION 10 1. IMPACT OF THE COVID-19 PAND EM I C ON EU INDUS T RIES 12 Impact on the economy as a whole 12 Analysis and assessment of the Impacts on specific industries 17 Impact on the automotive industries 17 Impact on the aerospace industries 19 Impact on the chemical industries 21 Impact on the construction industries 23 Impact on the food & drinks industries 24 Impact on the textiles & apparel industries 27 Impact on the cultural and creative industries 29 Impact on the digital industries 32 Impact on the healthcare industries 34 Cr os s-sectoral analysis 35 2.

5 Impacts ON STRATEGIC VALUE CHAINS 40 Overview of strategic value chains 40 Impact on strategic value chains 41 Automotive strategic value chains 42 Digital strategic value chains 44 Healthcare and chemicals strategic value chains 47 Relocation policies for Europe s strategic autonomy 49 3. AS S ESS ING THE recovery MEASU RES 52 Overview of recovery measures taken so far 52 Me a s ur es t ak en b y t h e E U 52 Me a s ur es t ak en b y Mem b er St a t es 53 The recovery plan and the Multiannual Financial Framework 2021-2027 55 The approval and implementation process 56 Assessment of the guidelines for the national recovery and resilience plans 59 Alignment of the draft national plans to the EU guidance and industry needs 62 IPOL | Policy Department for Economic, Scientific and Quality of Life Policies PE 66 2.

6 90 3 4 4. CONCLUSIONS AND RECOMMENDATIONS 65 REFER ENCES 70 ANNEX A: LIST OF INTERVIEWEES 82 ANNEX B: LIST OF ATTENDEES TO THE FOCU S GROUPS 83 Impacts of the COVID-19 pandemic on EU industries 5 PE LIST OF ABBREVIATIONS ACEA European Automobile Manufacturers' Association ADAS Advanced Driver-Assistance Sy st ems AI Artificial Intelligence API Active Pharmaceutical Ingredient AV Autonomous Vehicles B2C Business-to-Co n su mer CAV Connected and Au t o n om ou s Vehicle CCI Cultural and Creative industries CCSA Committee for the Coordination of Statistical Activities COVID-19 Coronavirus Disease 2019 CRII Coronavirus Response Investment Initiative CSR Country-Specific Recommendation EAMA European Automotive Manufacturers Association EC European Commission ECB European central bank EIB European

7 Investment Bank ES M European Stability Mechanism EU European Union GDP Gross Domestic Product GDPR General Data Protection Regulation HORECA Hotellerie-Restaurant-Caf JTF Just Transition Fund K ET Key Enabling Technologies IPOL | Policy Department for Economic, Scientific and Quality of Life Policies PE 66 2. 90 3 6 ICT Information and Communications Technology IMF International Monetary Fund IPCEI Important Projects of Common European Interest ITRE Committee on Industry, Research and Energy (of the European Parliament) IT Information Technology LIDAR Light detection Li-ion Lithium-ion MMF Multiannual Financial Framework NG EU Next Generation EU OECD Organisation for Economic Cooperation and Development OEM Original Equipment Manufacturer PC Personal Computer PMI Purchasing Managers' Index PPE Personal Protective Equ ipm ent Q Quarter (of the year)

8 R&D Research and Development REACT-EU recovery Assistance for Cohesion and the Territories of Europe RRF recovery and resilience Facility SME Small and Medium-sized Enterprises S TEM Science, Technology, Engineering and Mathematics SURE Unemployment Risks in an Emergency T&A Textiles and Apparel UK United Kingdom US United states Impacts of the COVID-19 pandemic on EU industries 7 PE LIST OF B OXE S Box 1: Electric vehicles 19 Box 2: Artificial Intelligence 34 Box 3: National recovery and resilience plans: main requirements presented in the guidelines 60 LIST OF FIGURES Figure 1: Number of daily new confirmed COVID-19 deaths per million people 13 Figure 2: Cumulative COVID-19 vaccination doses administered per 100 people 13 Figure 3: Real GDP growth path, EU 15 Figure 4: Euro ar ea real GDP 15 Figure 5: Unemployment rates EU27 and euro area, seasonally adjusted 15 Figure 6: Index of total actual hours worked of persons aged 20-64, EU27, 2006-2020 16 Figure 7: Manufacturing/services PMI 16 Figure 8: New car registrations in the EU 18 Figure 9: European Aerospace sector performance forecast (2020-2024) 21 Figure 10: EU27 Chemicals Output (January-November 2020) 22 Figure 11: Year on year change in construction output and real GDP 24 Figure 12: EU quarterly manufacturing production and turnover, 2015-2020 26 Figure 13.

9 Monthly output index of EU T&A s ectors 29 Figure 14: Estimated change in turnover 2019-20 by CCI sector 31 Figure 15: ICT spending by segment in Europe 33 Figure 16: Manufacturing industries production (q-o-q percentage change) 37 Figure 17: recovery outlooks - su mm ar y 38 Figure 18: Imports and exports of medical protective equipment 48 Figure 19: Structure and allocations for the MFF 2021-2027 and NextGenerationEU 56 Figure 20: Changes to the 2021 European Semester cycle 57 LIST OF TABLES Table 1: Key questions and objectives of this study 10 Table 2: EU Real GDP estimates (for 2020) and forecasts for 2021-2022 14 Table 3: Unemployment rate (number of unemployed as a percentage of total labour force) 16 Table 4: Overview of strategic value chains analysed 41 IPOL | Policy Department for Economic, Scientific and Quality of Life Policies PE 66 2.

10 90 3 8 EXECUTIVE SUMMARY The COVID-19 crisis has had an abrupt impact on the EU27 economy and triggered unprecedented policy responses across Europe and the globe. As the pandemic is still unfolding globally, and at the time that a second (and potentially even a third) wave still keeps Europe and the world in its grips, it is too early to assess the full Impacts of this crisis. Nevertheless, to support po licy ma ker s with evidence on the effects on the EU industry manifested so far, this report aims to address the following key questions: 1) What is the impact of COVID-19 on the EU economy, and how is the impact distributed among different sectors? 2) What structural changes has the crisis caused to our economy and the organisation of our value chains, and which value chains should be considered as strategic?