EY Entrepreneurship Barometer 2026: from resilience to systemic advantage

Entrepreneurs across wider Europe are adapting how they grow—embedding technology, rethinking talent and sharpening investment decisions under sustained pressure.

In brief:

• Entrepreneurs across wider Europe are recalibrating growth strategies, focusing less on scale and more on repeatable ways to perform under persistent uncertainty.
• Technology use is becoming more embedded, but value depends on execution quality, workforce adaptability and clearer links between investment and outcomes.
• Competitive strength increasingly comes from connecting innovation, people and capital decisions into coherent operating models rather than isolated initiatives.

Entrepreneurs across wider Europe are responding differently to uncertainty than they did a year ago. While the external environment remains challenging — with regulatory complexity, cost pressures and talent scarcity continuing to weigh on business performance — the 2026 findings point to a clear behavioral shift.

Businesses are not stepping back from transformation; they are becoming more deliberate in how they execute it. Investment is more disciplined, AI adoption is scaling, and workforce models are evolving to prioritize flexibility over scale.

What is emerging is no longer a story of intent, but one of execution. By systemic advantage, we mean an edge built into how a business operates; formalized, repeatable systems of execution across innovation, technology and capital allocation.

A pragmatic thesis emerges from the data: The most resilient firms are beginning to build systemic advantage through three reinforcing dynamics — strengthening product and operational innovation, applying AI to improve productivity and decision quality, and funding transformation through disciplined, payback-driven investment.

Key takeaways

• Entrepreneurs continue to operate in a high-friction environment, led by regulatory complexity (63%), skills shortages (46%), and economic instability (41%).
• AI adoption has accelerated sharply, reaching 76% in 2026 (vs 61% in 2025), marking a shift from experimentation to operational deployment.
• Talent remains the binding constraint on growth, with skills (63%) and experience gaps (50%) limiting scale.
• 2026 remains a margin-defense year, with labor (80%) and operating costs (79%) emerging as the dominant risks.

Respondent profile

The 2026 EY Entrepreneurship Barometer draws on insights from 1,009 entrepreneurs across 14 countries in wider Europe, providing a representative view of the Region’s business landscape. The sample remains anchored in privately owned established SMEs and mid-market firms, over half of which operate as family businesses. While the overall profile remains broadly stable year-on-year, there are early signs of gradual shift — including a higher share of younger companies and increased female representation — pointing to a slowly evolving entrepreneurial base operating within unchanged structural conditions.

The operating environment: friction at scale

Entrepreneurs across the Region continue to face structural barriers that constrain growth and investment decisions.

Regulatory complexity remains the most significant constraint (63%). Talent shortages (46%) and broader economic and political instability (41%) further compound the challenge, creating an environment where scaling requires navigation of multiple, overlapping pressures.

Beyond these headline barriers, the broader ecosystem remains uneven across the Region. While some constraints show marginal easing, others — particularly financing and infrastructure — are becoming more pronounced, pointing to a widening “scale gap” between firms with access to capital, talent, and execution capabilities, and those without.

Sentiment reflects this tension. Entrepreneurs are not retreating, but neither are they fully confident, signaling a Region that is stabilizing rather than entering a clear growth phase.

AI: from experimentation to execution

Across the Region, innovation is becoming more execution focused. Product innovation continues to lead, strengthening its position year-on-year, while process and organizational innovation remain critical enablers. By contrast, both strategic and marketing innovation show only marginal movement, reinforcing the view that entrepreneurs are prioritizing tangible, near-term impact over broader repositioning.

This shift toward practical, outcome-driven innovation is most visible in the way businesses are approaching technology. AI has moved from a peripheral experiment to a core operational tool, representing the most significant inflection point in this year’s Barometer.

Adoption data confirms this transition.

Adoption of AI and machine learning has now reached 76% across the Region, up from 61% in 2025, one of the most material shifts observed in the survey. What was previously exploratory is now embedded across a wide range of business functions — from marketing and operations to HR and decision-making — reshaping what “digital maturity” means in practice and making AI part of day-to-day execution.

Beyond adoption, investment patterns reinforce this shift. The share of businesses not investing in AI has declined, while a growing segment is committing more substantial funding, signaling a move beyond experimentation toward more structured, enterprise-level deployment.

However, value realization remains uneven. While the majority report improvements in efficiency (60%) and cost optimization (51%), significantly fewer see revenue impact (38%), highlighting a persistent gap between adoption and commercial outcomes.

At the same time, expectations are maturing. Compared with 2025, fewer entrepreneurs now anticipate broad, transformative gains. Instead, the focus has shifted toward targeted, use-case-driven outcomes, placing greater emphasis on execution, governance, and integration.

As a result, the competitive advantage no longer lies in adopting AI, but in deploying it effectively. 

Talent: the binding constraint on growth

Despite increased investment and digital adoption, the ability to scale remains constrained by talent.

Skills shortages remain the most significant barrier to growth (63%), with a lack of job-ready experience further limiting hiring effectiveness (50%).

This is reflected in broader workforce challenges:

Attracting and retaining talent remains the top challenge (44%), followed closely by labor cost pressure (41%) and employee engagement (37%). Emerging issues such as hybrid work management and compliance signal that workforce complexity is increasing.

In response, workforce models are evolving:

• Hiring of permanent staff is slowing (72% vs 79%).
• Use of contractors is increasing (64% vs 58%).
• Reliance on external partners is rising significantly (79% vs 65%).

Rather than scaling headcount, firms are increasingly buying flexibility, to build more agile, hybrid workforce models.

Investment: conviction with discipline

Entrepreneurs continue to invest, but with greater selectivity and scrutiny.

Investment remains focused on technology, automation, and operational efficiency, while expansionary investments are more cautious.

At the same time, capital discipline has become more selective, with stronger emphasis on investment returns and shorter payback periods.

Macroeconomic uncertainty remains the primary constraint on investment, cited by 57% of respondents, indicating that market volatility continues to shape capital allocation decisions. Financial constraints follow as the second most significant barrier (41%), alongside geopolitical instability (40%), reflecting increased exposure to external shocks.

Regulatory and political uncertainty also remain a material friction point (37%), limiting confidence in longer-term investment decisions.

Against this backdrop, expectations of returns are becoming more stringent, with a growing share of firms placing greater emphasis on ROI and shorter payback periods. This reinforces a shift toward more cautious, staged investment approaches.

Financing structures remain conservative, with 65% of businesses relying primarily on reinvested profits. While this reinforces resilience, it also limits the pace at which firms can scale and pursue larger transformation agendas.

Overall, investment strategies are becoming more targeted and selective. Capital discipline, return thresholds and the need to balance growth ambitions with downside protection continue to shape broader business investment decisions, even while AI investment is accelerating.

Risk landscape: defending margins

Across the Region, the combination of persistent cost pressure, constrained talent and disciplined investment is converging into a clear margin-defense imperative for 2026.

Labor (80%) and operating (79%) costs remain the dominant risks to financial security, with inflation and geopolitical instability both at 74% and reinforcing uncertainty. This concentration of risk around cost structures reflects a broader shift in the operating environment, from cyclical cost volatility to more persistent, structural pressure on margins.

At the same time, transformation is delivering mixed outcomes. While many firms report improvements in operational efficiency and digital maturity, people outcomes are lagging: Only 40% report improved employee satisfaction, while 24% report rising turnover.

This highlights a growing tension between transformation and organizational capacity. As businesses accelerate execution, the ability of the organization to absorb change is increasingly being tested.

Risk itself is also evolving. While some cost pressures are stabilizing, others — particularly supply-chain disruption — are intensifying, shifting the challenge from price volatility to operational reliability. For many firms, the issue is no longer responding to isolated shocks, but managing multiple, overlapping sources of disruption simultaneously.

The result is a structural shift from cost volatility to cost permanence — where elevated costs are no longer temporary disruptions, but embedded features of the operating environment.

Ownership and succession: the continuity gap

Family businesses remain central to the Regional economy, representing 54% of respondents.

However, succession planning and governance maturity remain underdeveloped across the Region:

• Only 23% of businesses have formal succession plans.
• Succession has not been addressed at all among 29%.

This highlights a persistent continuity gap. While many businesses remain focused on growth and digital transformation, governance structures and long-term ownership planning are not evolving at the same pace.

At the same time, ownership intentions reflect a predominantly “patient owner” mindset across the Region. Most entrepreneurs are not actively pursuing exits in the near term, favoring continuity — typically through family succession or trade sale — over more immediate liquidity events.

This creates a structural tension: Legacy ownership models may limit the ability of businesses to modernize, digitize and scale.

The implication is clear: Long-term competitiveness will increasingly depend not only on operational execution, but on the ability to evolve governance, ownership structures, and succession planning alongside it.

Bottom line

Entrepreneurs across wider Europe continue to operate under sustained pressure. Yet the 2026 findings point to a more important shift: Intent to transform no longer defines businesses, but rather their ability to execute.

AI is scaling. Investment is becoming more disciplined. Workforce models are evolving. But the real differentiator lies in the ability to connect these elements into a coherent, repeatable system.

In this environment, systemic advantage will not come from isolated initiatives, but from systematic execution. Those that can institutionalize this execution model will be best positioned to outperform as macro conditions stabilize.