European Union industrial policy

The European Union (EU) industrial policy aims to make industry more competitive so that it can generate sustainable growth and employment in EU Member States. Article 173 of the Treaty on the Functioning of the European Union provides the legal basis for the EU’s industrial policy, which is a cross-cutting policy area with close links to other policy areas, such as the internal market, trade, competition, research and innovation, employment, digitalisation and environment-related policies. In accordance with a system of open and competitive markets, the policy aims to:

speed up the adjustment of industry to structural changes;
encourage an environment favourable to initiative and to developing businesses throughout the EU, particularly small and medium-sized enterprises (SMEs);
encourage an environment favourable to cooperation between businesses; and
foster better use of the industrial potential of policies of innovation, research and technological development.

In March 2020, the European Commission presented a new industrial strategy for Europe as part of a package of initiatives for making Europe’s businesses future-ready, which also includes a new SME strategy, steps to address barriers to the single market and better implement and enforce single market rules. The new industrial strategy will support the green and digital transitions of EU industry, make EU industry more competitive globally and enhance the EU’s open strategic autonomy.

To achieve this, it defines seven fundamental enabling factors, such as a deeper and more digital single market, upholding a global level playing field, working towards climate neutrality and a more a circular economy, and fostering innovation, skills and investments.

The strategy proposes a partnership approach to governance around the concept of industrial ecosystems, incorporating all players operating in a value chain, and promotes the creation of joint initiatives bringing together investors, governmental, institutional and industrial partners in key technologies and business areas, such as industrial alliances.

The strategy was updated in May 2021 to ensure that its industrial ambition takes full account of the new circumstances following the COVID-19 pandemic. It draws on the lessons learnt from the health crisis, such as the need to uphold the free movement of persons, goods, services and capital in the internal market and the need to work together to strengthen its resilience to disruptions. The updated strategy lays out the main policy priorities under three main strands:

strengthening the resilience of the single market;
dealing with the EU’s strategic dependencies and strengthening the EU’s open strategic autonomy to avoid over-dependency on non-EU countries for supply of critical goods;
accelerating the green and digital transitions.

The updated strategy is accompanied by the first Annual Single Market Report, including an analysis of the state of play of the EU economy based on an assessment of industrial ecosystems, a report on the progress made in delivering the March 2020 industrial package (including the single market enforcement action plan, the new industrial strategy and the SME strategy) and a set of key performance indicators to monitor further progress, together with a first analysis on the EU’s strategic dependencies and capacities.

On 23 February 2022, the Commission published the Annual Single Market Report 2022 and the second edition of in-depth reviews of the EU’s strategic dependencies.