Southern Europe is driving a surge in young, fast-growing firms, reshaping the entrepreneurial landscape as traditional leaders like Germany face unexpected setbacks.

A recent analysis of Europe’s entrepreneurial ecosystem reveals a dynamic shift, with Southern European countries like Malta, Greece, and Portugal leading the charge in scaling up young, high-growth businesses. This marks a significant change from historical trends, where Northern Europe dominated the ranks of fast-growing firms. Spain, Italy, and Ireland have also shown structural improvements, further solidifying the region’s growing influence.

The report highlights that while the overall growth rate of scale-ups has slightly decreased in 2024 compared to peak levels in 2023, the underlying trend remains positive. Younger businesses are driving much of this momentum, particularly in sectors like information and communication, as well as administrative and support services. Despite economic challenges, these firms are recovering strongly from the lows experienced during the COVID-19 pandemic years.

Conversely, traditional growth leaders such as Germany, Sweden, and Finland have experienced unexpected declines, with Germany falling below the EU average in startup scale-up rates. Experts suggest this reflects a broader rebalancing of Europe’s entrepreneurial landscape, as Southern Europe builds vibrant ecosystems capable of sustaining business growth. However, financial barriers remain a challenge for EU startups, which often seek funding abroad, highlighting the need for improved access to capital within the region.