With an estimated four million people employed in the industry in EU27 countries, the region has an important role to play globally as a location for business services

EMEA’s position on the global business services map is increasing in a post-pandemic world. The region provides added value, market proximity and access to an extensive pool of talent across the European continent. According to the EMEA Business Services Landscape 2023 report, unveiled at the first ABSL European Forum in Berlin, the sector in the region continues to thrive through the expansion of Knowledge Intensive Business Services (KIBS).

ABSL Business Intelligence estimates that the business services sector employs up to 4.2 million people in EU27 countries and exceeds 5 million when the EEA, candidate countries, and the UK are included. The industry is becoming an even more important engine for local economies to attract new investors. In fact, the sector is helping to drive economic growth across Europe, according to the EMEA Business Services Landscape 2023 report, compiled by ABSL, EY, Colliers, and Randstad, which includes snapshots of 18 countries in the region. It covers the most-up-to-date location metrics, which illustrate the growing role of the sector and underlines the importance of expanding the Knowledge Intensive Business Services (KIBS) talent pool.

A uniting engine for European growth

Europe is expected to be of key importance against the backdrop of potential decoupling and the formation of a European value-added chain. According to ABSL Business Intelligence, the impact of Brexit, the Covid pandemic, and the Russian invasion of Ukraine, along with the stealthier grey rhino events such as digitalization and global value chain reconfigurations pose consequential challenges to address.

“With regard to shifts in the economic, social, and geopolitical arenas, business leaders need to reconsider decisions related to the location and development of business centers. The potential decoupling of China and the formation of regional valued added chains offer Europe, along with the Mediterranean basin countries, give the opportunity to become the global destination of choice. The region offers the possibility to locate and operate business processes across the whole spectrum – from the base transactional level to the most advanced high-value added and knowledge-intensive services. These potential changes would in turn represent a valuable link in the formation of a European regional value chain. EMEA as a whole offers from a time zone perspective, an ideal location for service processes, not only within the region but globally as well,” said Jacek Levernes, Honorary President, and Co-Founder of ABSL.

“The EMEA region, taking into account trends such as nearshoring and best-shoring, provides the opportunity to create a network of competence centers. It is worth emphasizing that as a whole the region when costs and business continuity are taken into account, offers economies of scale,” adds Dariusz Kubacki, Vice-President, Business Intelligence & Thought Leadership, ABSL.

Shift towards KIBS

In the business services sector, the shift towards complex and high-value adding Knowledge Intensive Business Services (KIBS) is becoming more prominent.

The total talent pool for KIBS in the EU27 at the end of 2021 was estimated to be 12.4 million (16.8 million when the EEA, candidate countries, and the UK are included)[1]. In 2016, it was 10.7 million and 15.0 million, respectively. KIBS had a 6.4 percent share of total employment in Europe in 2021 (5.7 percent in 2016). Between 2016 and 2021, the talent pool in the EU27 grew by 1.75 million or 16.4 percent (in Europe as a whole it rose by 1.9 million or 12.5 percent). This growth has led to increasingly intense competition for KIBS talent and highlights the need for systemic solutions to build a talent pool in a competitive global market.

“The KIBS talent pool is spread across the whole of Europe, with strong concentrations in major metropolitan areas including significant academic centers and capital cities,” stresses Dariusz Kubacki. “The top five concentrations of Europe’s talent pool in 2021, in absolute numbers, are the Paris metropolitan region, Madrid, Milan, Berlin, and Munich.”

In 2021, the largest estimated KIBS talent pools in absolute terms were in Germany and the UK (2.6 million), followed by France (1.8 million), Italy and Spain (1.3 million), Poland and Turkey (0.8 million). According to the EMEA Business Services Landscape 2023 report, the share of the sector in the broader KIBS industry talent pool (data for 11 EU27 Member States) varies considerably across countries. It is relatively low in Spain (12.4 percent), Hungary, and Lithuania while in Poland, Romania, and Bulgaria it is close to or even exceeds 50 percent.

The business services sector’s average share in KIBS industry employment in EU27 countries is estimated at around 34%.

The EMEA Business Services Landscape report, presented during ABSL European Forum, in Berlin seeks to establish the lie of the land in early 2023. The sector needs to continue its transformational efforts with an emphasis on KIBS as a key element in remodeling business services around the world.

ABSL Publications - EMEA's Business Services Landscapes (shop-absl.pl)

[1] The modern business services center sector which accounts for SSC, BPO, GBS, IT, and R&D centers, constitutes a part of the larger KIBS industry.