European security is seemingly back on track amid a post-COVID economic recovery in the region. Yet the industry, like other sectors, is still impacted by challenges. How to overcome these challenges, then, becomes key.
European security is seemingly back on track amid a post-COVID economic recovery in the region. Yet the industry, like other sectors, is still impacted by challenges in the forms of supply shortages,
geopolitical tensions and interest rate hikes. How to overcome these challenges, then, becomes key for European security players trying to stay ahead.
Europe is now seeing an economic recovery as the pandemic eases and projects resume. According to the European Commission’s “Spring 2023 Economic Forecast” report, the euro area is expected to see GDP grow 1 percent this year and 1.6 percent for 2024. “Business investment is projected to still increase, though at a slower pace than last year, helped by corporates’ overall healthy balance sheet position. Public investment is forecast to remain buoyant in both 2023 and 2024 thanks to the continued deployment of the Recovery and Resilience Facility (RRF),” the report says.
This, then, has an overall positive impact on Europe’s security industry. “Growth in the European market has returned to pre-Covid norms after the catch up of delayed projects that we saw in 2022. We are seeing general economic growth in Europe, with the updating of old or tired infrastructure, particularly in the Education and Health sectors, and office refurbishments which take into account new post-Covid norms in working patterns, all being drivers,” said John Davies, MD of TDSi.
Demand is particularly strong in certain vertical markets. “We see a gradual recovery of the overall situation for 2023 after the pandemic,” said Thomas Lausten, CEO of MOBOTIX. “We expect long-term market growth for our solutions, particularly in the industry and manufacturing, healthcare, government, and municipal sectors, as well as in the transport, logistics, and energy sectors. The increased demand is because there is a specific pent-up demand for investment.”
Challenges and ways to cope
Yet that is not to say European security players are already out of the woods. In particular, supply shortages, though eased a bit, remain a key problem.
Inflation, and the ensuing interest rate hikes, aren’t making things better. According to the aforementioned EC report, inflation is expected to average 6.7 percent this year, before dropping down to 3.1 percent for 2024. In the meantime, the European Central Bank has been hiking up interest rates to curb inflation. According to Trading Economics, the bank’s rate on main refinancing operations has been hiked up to 4.25 percent, the highest since October 2008, and the rate on the deposit facility to an over 22-year high of 3.75 percent.
Needless to say, this is having an impact on various European industries, including security.
“Interest rate hikes across the European continent are beginning to affect projects and as a result we are seeing some timeline/delivery slippages,” Davies said. “The supply chain issues are beginning to lessen, and problems are easing as we go through the year. Careful planning and forecasting are still the major watchwords though, to ensure everything is delivered to meet demand.”
“Supply chain issues are improving but remain a concern for many in the sector. Manufacturers will continue to be challenged to source components for high-end functions, such as AI, WDR, and high frame rate, while keeping prices manageable, especially in the wake of economic uncertainty,” said Uri Guterman, Head of Product and Marketing at Hanwha Vision Europe.
To counter this, governments and businesses across the globe, including in Europe, are investing in local manufacturing of key parts and components, so as to reduce overreliance on other countries.
“There are global tensions that are factoring into buying decisions with more governments and businesses mitigating this by investing in robust supply chains and increasing the capability to manufacture key technology components within less risky countries. The U.S. for example has recently committed US$280 billion to high-tech manufacturing and scientific research. The European Union recently said it would commit more than €40 billion to boost production of computer chips and to reduce its reliance on other countries,” Guterman observed.
Yet companies themselves also need to stay nimble and agile to be able to weather, and ultimately win out from, the shakeout.
“Those with agile and responsive R&D will remain ahead,” Guterman said. “For example, when Hanwha Vision’s supply chain team in South Korea identified several components in our lines that were experiencing shortages or inventory issues, they analyzed how to redesign those products quickly with a different component or material while keeping the same performance profile of the product. As a result, we were able to bring several products to market in a timely manner and still fulfil customer orders.”