Southern Europe leads boom in young, high-growth firms, as Germany falls behind

The booming expansion of young, fast-growing firms and sustained growth achievers is providing European business with foundations for future success, a new report has said

In a study released in July, but largely overlooked, the European Scaleup Institute’s monitor, which tracks growth dynamics in member states, found a slight decrease in 2024 since peak levels in 2023, despite an underlying growth trend

A lot of this growth is being supported by younger businesses, even as the economy has slowed down. And while the research pointed at a plateau in growth in 2024, all metrics show recovery from lows during the COVID-19 years of 2020–2021

Despite consistent difficulty faced by smaller startups in growing over the years, from scaling up to keeping up high growth over time, growth was especially notable in information and communication sectors, with administrative and support services close behind

The financial barrier preventing young, innovative firms from expanding past early stages are especially felt in the EU, where scale-ups raise only half the capital of Silicon Valley peers

Many EU companies are pushed to seeking funding abroad, often resulting in them becoming listed on foreign stock exchanges

Founded at Vlerick Business School in Belgium, the European Scaleups Institute is a network of entrepreneurship researchers from business schools around the EU, tracking the evolution of over 2m high-growth companies

“Historically, it has been Northern European countries that often dominated the ranks of high-growth,” said Veroniek Collewaert, entrepreneurship professor at Vlerick

“The latest data, however, suggests that Southern Europe has become one of the most dynamic regions on the continent,” she added

Malta, Greece, and Portugal, were the strongest winners on the continent for consistency in scaling-up its up-and-coming businesses, with structurally improved positions in Spain and Italy, as well as Ireland

Conversely, the study found that traditional growth leaders, such as Europe’s largest economy, Germany, as well as Nordic countries, experienced unexpected setbacks

Germany ended up below the EU average in the scale-up rate of its startups, with Sweden and Finland also recording declines

“This emerging pattern reflects a broader rebalancing of Europe’s entrepreneurial landscape,” Collewaert added.

“While many Southern European economies were among the hardest hit during earlier economic crises, they are increasingly producing vibrant ecosystems capable of generating sustained business growth,” she said