Between January 2025 and June 2026 the European Commission tabled twelve omnibus packages, cutting roughly €14 billion a year in recurring administrative cost, on the way to a target of €37.5 billion by the end of this mandate. Mario Draghi's diagnosis, the one that started all of this, said the EU needs an extra €750 to €800 billion of investment every year. Those two numbers are not the same size and they are not even the same kind of thing. One is paperwork. The other is capital. We are rediscovering that growth comes from investment, which is welcome. So far we are mostly rediscovering it in press releases.
The arithmetic of the correction
Let me be fair about what that chart does not prove. Administrative savings and investment are different things. Cutting reporting obligations frees management time and lowers the fixed cost of being a company, and for a firm of forty people that matters more than the headline number suggests. But nobody ever built a grid, a laboratory or a railway line out of a saved reporting obligation. If simplification is the whole growth agenda, the growth agenda addresses about a twentieth of the problem it was written to solve.
The pace tells the same story. Draghi reported in September 2024. A year later, around 11 per cent of his recommendations had been implemented. In April 2026 CaixaBank Research summed up the Competitiveness Compass as positive in direction and debate, limited in progress.
Where the money did not go
The absolute number is the trap. Four hundred billion euro sounds like a serious commitment until you take it as a share of output: 2.24 per cent, essentially flat for ten years, against 3.45 in the United States. China passed the EU some years ago and kept going. Malta, where I spend half my year, sits at 0.51 per cent.
Note where Britain sits on that chart, because it complicates the easy story. On research intensity the UK does not have a problem. Its difficulty is somewhere else entirely, and I will come to it.
This one compounds quietly. Modern productivity gains come from automation and digitisation, and both consume electricity. So the most expensive power in the developed world acts as a tax on precisely the investment that would close the productivity gap.
Britain made the same mistake, differently
The UK gets folded into "Europe" in this argument and it should not be. Its diagnosis is genuinely different. Britain is not under-researching. Gross R&D expenditure was 2.77 per cent of GDP in 2022, above the OECD average and comfortably above France, and the UK still ranks fifth in the world for the number of companies in the global top 2,000 corporate R&D investors. Although even there the trend bites: the number of UK-headquartered firms in that top 2,000 has fallen by more than half since 2012.
Britain's failure is in physical capital, in energy, and in people.
On capital, UK firms invest 11.1 per cent of GDP, second lowest in the G7, and the UK has had the lowest investment rate in the G7 in 23 of the past 31 years. The IPPR's April 2026 estimate is that British workers have around 38 per cent less equipment at their disposal than counterparts in the US, Germany, France and the Netherlands, rising to 47 per cent in manufacturing. The UK ranks 24th in the world for robot density and is the only G7 country outside the global top 20. The output shows up exactly where you would expect it to.
Fourth of seven, roughly a fifth below the United States on output per hour. Not catastrophic. Not the performance of a country that describes itself as a leading economy either.
On energy, the UK is worse than the EU average it is usually compared favourably against. In 2024 Britain had the highest industrial electricity prices of every IEA member for which data was available, on both a pre-tax and post-tax basis. Higher than Germany. Higher than an EU average that already runs at over twice US levels. If the plan is to reindustrialise around automation and artificial intelligence, and both run on electricity, that is not a detail. It is the plan's central contradiction.
And then people, which is the part I work in professionally and the part that gets the least airtime.
The apprenticeship levy was introduced in 2017 explicitly to raise employer investment in training. Since then, spend per employee has fallen a further 23 per cent, and that figure includes the levy itself. We built a tax to solve a problem and the problem got worse.
You cannot raise output per hour worked while cutting what you spend on the person doing the hour.
Infrastructure completes the British picture. Britain has one completed high speed line, HS1, at 110 km, opened in stages to 2007. HS2's northern legs to Manchester and Leeds were cancelled in October 2023 and confirmed dead in October 2024. Phase 1 to Birmingham is still under construction, its original 2026 opening long gone, with a revised date awaited after the current programme reset.
What the US and China actually did
Neither is a settlement I would want to import wholesale. But both did one thing Europe and Britain stopped doing. They treated capital formation as the objective and everything else as a constraint to be managed around it.
The American route was cheap shale energy, deep and liquid capital markets, and a tolerance for companies that scale fast and fail hard. The Draghi finding that should keep European ministers awake is this: no EU company founded in the last fifty years has reached a market capitalisation above €100 billion, while all six US companies valued above €1 trillion were founded in that window. Close to 30 per cent of European unicorns founded between 2008 and 2021 moved their headquarters abroad, mostly to the United States.
The Chinese route was state direction, state bank credit, and political will held constant across decades. The China scholar Jonathan Holslag put it plainly when the rail network passed 50,000 km: state capitalism at its strongest, where the political will is there and the rest follows.
Europe's route was rules. Often good rules. But a rule is a claim on a surplus, and if you write claims faster than you generate surplus, the arithmetic eventually finds you.
Where this argument is weakest
Three objections, and all three are serious.
First, the panic may be overstated. Olivier Blanchard at the Peterson Institute has argued that most of the EU to US growth gap since 2000 is demographic, not productive. EU GDP growth ran about 0.5 points a year below the US, but real income per capita grew only about 0.1 points slower. Over twenty-five years that is a gap of a few per cent, worth fixing and not existential.
Second, "simplification" is doing concealment work. Omnibus I, in force since March 2026, raised the reporting threshold to 1,000 employees and €450 million turnover, cut around 70 per cent of mandatory data points, and removed the harmonised liability regime from the due diligence directive. Some of that is proportionality, and overdue. Some of it is a transfer of risk from companies to everybody else. It should be argued on those terms rather than sold as tidying up.
Third, China's investment rate is not automatically a virtue. Investment at around 41 per cent of GDP includes an enormous quantity of capital that will never earn a return, much of it financed by local government debt. High investment is not the same as good investment, and the difference will show up in the 2030s.
Which is why I would put this as a sequencing problem rather than an anti-compliance one. I run a compliance training business, so I have every commercial reason to claim compliance creates wealth. It does not. Compliance is a claim on wealth that already exists. It protects consumers, workers and savers, and most of it is worth having. But it sits downstream. Spend twenty years perfecting the downstream while starving the upstream and you end up with an immaculately governed economy that can no longer afford its own governance. That is the position Britain and Europe talked themselves into, with public consent, at election after election.
Four tests, and one silence
Here is what almost nobody in Brussels, Westminster or Valletta says out loud. The choice was deliberate and it was popular. We chose insurance over growth, repeatedly, and voters approved. The correction will not hold on technocratic memos alone. It holds only when a politician is willing to make the positive case for creating wealth rather than the safer case for protecting it. Right now that case is being made almost entirely by economists and central bankers, which is to say by people who do not face elections. Watch which elected politicians start making it in their own words. They are the ones who will matter after 2029.