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Navigating the path to growth: Top trade risks and geopolitical challenges for European companies

Businesses face a world made more volatile and riskier by ongoing systemic geoeconomic and geopolitical changes.

Businesses face a world made more volatile and riskier by ongoing systemic geoeconomic and geopolitical changes. A decade ago, it could be reasonably argued that such a statement would not extend to Europe. However, as governments increasingly pursue state-led economic policies, the intensifying frequency and severity of trade disruption and distortion will undoubtedly reach and also be shaped by European capitals. Additionally, with the most destructive inter-state war in decades entering its third year on Europe’s eastern doorstep, European businesses are now approaching operational planning in an unusually uncertain political and economic context.

Strengthening the ability to identify, prepare for, and mitigate difficult-to-predict challenges is therefore paramount for business leaders. In the coming year and beyond, the trends reshaping international politics, trade, and finance will also be influenced by specific risks in 2024:

1) Record election year and rise in far right support

Europe will participate in a record global election year. In addition to nine national parliamentary elections, half of which could deliver notable changes in policy direction, European Parliament elections will also take place in June. All of these could see protests, strikes, and civil disruption as voters head to the polls. Meanwhile, the outcome of November’s US election could potentially upset transatlantic political and business relations. Throughout this record year, expect media coverage to create some distracting narratives, potentially complicating the ability of executives to separate noise from the trends.

In Europe, concerns about the rise in support for radical far-right parties are underlined in a number of elections, including:

  • European Parliament, June 6-9, 2024:

While polls suggest that the European People’s Party (EPP) and the Progressive Alliance of Socialists and Democrats (S&D) are likely to retain their current standings, polls also indicate gains for the far-right Identity and Democracy party.

Recent election wins in the Netherlands, Finland, Sweden, and Portugal, as well as projections in Austria, also support this trend.

  • Portugal, March

A center-right alliance led by the Social Democratic Party (PSD) narrowly won Portugal’s recent election, but the far-right Chega (Enough) party saw a rise in support, winning 50 seats (from 12 in 2022)

  • Austria, September

Polls suggest the far-right Freedom Party of Austria (FPÖ) is gaining ground, with a coalition between the FPÖ and the center-right Austrian People's Party (ÖVP) one likely outcome.

2) Economic transition

The delicate macroeconomic transition underway globally may lead businesses to question otherwise available investment opportunities. The rise in overall insolvency rates in most EU countries may complicate European operations, while assets located in other parts of the world may be exposed to economically induced political risks. This may include unstable food and energy supplies stoking political unrest. Low demand from advanced economies could create further risk, suppressing exports from several emerging economies. 

3) Climate policies

Domestic climate politics will likely clash with international climate objectives, potentially derailing progress on the green transition in unpredictable ways. At the EU border and in emerging markets, governments will increasingly intervene in response to more regular and severe climate events, and businesses will need to manage supply chain disruption risk.

By understanding how time-sensitive risks and long-term political trends affect business decisions, companies can more effectively position themselves in uncertain geopolitical and economic conditions and take advantage of opportunities. In such an atmosphere, intelligent allocation of risk can help corporates and lenders continue to secure capital, access liquidity, and manage through ambiguity, thereby enabling ongoing trade and demand capture. 

To find out more about how to navigate the political and economic risk landscape in 2024, download the Political risk report 2024.

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