European industrial policy and the challenge of scaling innovation

For decades, European industrial policy has been structured around the principle of a well-functioning single market, supported by robust regulation and programmes promoting research and innovation. This approach has enabled the European Union to consolidate its position as a scientific and regulatory power, but it also reveals its limitations in a profoundly transformed global context.

Industrial policy is no longer defined solely by the capacity to innovate, but by the ability to turn that innovation into large-scale production, strategic autonomy and economic resilience. In this new environment, the European Union faces a central challenge: moving from being an excellent generator of knowledge to becoming an actor capable of industrialising, retaining and scaling key technologies within its borders.

A paradigm shift driven by the global context

The current shift in European industrial policy is not ideological; it is a direct response to a much tougher geopolitical, economic and technological reality. The pandemic, the war in Ukraine, trade tensions, and the acceleration of the green and digital transitions have exposed a structural vulnerability: Europe is overly dependent on third countries for critical technologies, raw materials and industrial capabilities.

Meanwhile, other major powers have responded with decisive strategies. The United States has deployed an explicit industrial policy based on massive incentives, territorial conditionality and strong public sector involvement, as illustrated by the Inflation Reduction Act and the CHIPS and Science Act. China, for its part, continues to strengthen its long-term strategic planning model, integrating industrial policy, control of value chains and sustained financial support.

In contrast, the European Union has embarked on its own path — more fragmented, but increasingly aware of the need to act. Initiatives such as the Net-Zero Industry Act, the Critical Raw Materials Act, the European Chips Act, and the strengthening of defence and space instruments reflect a change in tone: industrial competitiveness is once again at the heart of the European project.

Europe’s real challenge: scaling

The EU remains a global leader in scientific output and retains a strong technological base in strategic sectors; its problem is therefore not a lack of innovation. The real bottleneck arises at the subsequent stage: the transition from laboratory to factory.

Too many European projects become trapped at the demonstration phase, failing to make the leap towards full-scale industrial production. This results from a combination of well-known factors: market fragmentation, difficulty accessing finance for capital-intensive projects, the absence of early buyers, complex regulatory frameworks, and a culture of risk aversion that penalises investment in first-of-a-kind industrial plants.

As a consequence, technologies developed in Europe are often scaled elsewhere, where financial and regulatory conditions are more favourable. The cost of this dynamic is not merely economic; it is strategic. Every plant not built in Europe implies future dependency, the loss of skilled industrial employment, and diminished global influence.

Implications for the next Multiannual Financial Framework (2028–2034)

The debate surrounding the next Multiannual Financial Framework is, in essence, a debate about Europe’s economic model. It is not only about how much to invest, but how and for what purpose. Recent developments in industrial policy point to several clear trends that are likely to consolidate in the next budgetary period.

First, a far more explicit orientation towards industrial capacity. European programmes will increasingly prioritise projects that demonstrate a clear pathway to production, value chain creation and tangible economic impact, beyond purely technological results.

Second, greater integration of financial instruments. Pure grants will remain relevant in early stages, but they will increasingly be combined with loans, guarantees, equity and public procurement mechanisms. Scaling requires financial volumes that far exceed traditional grant-based support.

Third, a simplification — still insufficient — of support frameworks. The European Commission is aware that administrative complexity represents a real barrier for innovative companies, particularly SMEs and industrial start-ups. The challenge will be to move from intention to effective implementation.

What this means for companies

For companies — especially those operating in strategic sectors such as energy, mobility, clean industry, defence or deep digital technologies — innovation alone is no longer sufficient. They must demonstrate the capacity to drive market uptake and scale.

This entails a profound shift in how European projects are designed. The most competitive proposals will be those that incorporate from the outset a comprehensive industrial vision: planning for pilots and first-of-a-kind plants, CAPEX and OPEX analysis, supply strategy, market access, and strong industrial partnerships — fully aligned with new criteria of excellence, European objectives and policy priorities.

Collaboration is becoming indispensable. Winning projects will not be isolated initiatives but ecosystems connecting technology, industry, finance and markets. Brussels seeks to reduce systemic risks, and this is only possible when risk is shared.

The role of specialised strategic consultancy

In this context, innovation and EU funding consultancy is also evolving. Its role is no longer limited to identifying calls for proposals or drafting applications, but to supporting strategic decisions on investment, technological positioning and industrialisation.

Aligning corporate strategy with European priorities, structuring projects that are financially viable and politically relevant, and anticipating future evaluation logic become critical success factors. The boundary between public policy, industrial strategy and finance is increasingly blurred and requires an integrated perspective.

A genuine window of opportunity, but time-limited

Europe stands before a historic opportunity to strengthen its industrial base and strategic autonomy. Political signals are clear and instruments are evolving in the right direction. But time is not on its side.

If the next Multiannual Financial Framework fails to translate ambition into real delivery capacity — plants, value chains, industrial jobs — the risk is not merely a loss of competitiveness, but a loss of global relevance.

For companies and institutions alike, the time to act is now. The new European industrial policy no longer rewards technological excellence alone, but the ability to turn innovation into industry. Those who understand this shift and anticipate it will be in a position to lead the next phase of the European project.