Further digitisation in Europe could lift GDP by €2.5 trillion
Figures published today that by McKinsey Global Institute (MGI) claim Europe is currently operating at only 12 percent of its digital potential compared with18 percent in the U.S., with the outfit claiming that further digitisation could bolster GDP by €2.5 trillion within 10 years.
Europe is operating at a tiny proportion of its digital potential
One point worth noting is that while the report is published today (30 June), the GDP estimate was calculated well in advance of last week’s shock decision by the UK electorate, where voters elected to leave the European Union.
The study, dubbed Digital Europe: Pushing the frontier, capturing the benefits, shows the region is “in the middle of a digital transformation”, although there is also significant variance among countries, among companies, as well as industry verticals.
Among the findings, McKinsey claims: 96 per cent of millennials have used the internet in the past three months; 3G mobile broadband coverage is at 98 per cent; the digital economy accounts for nearly 5 per cent of EU-28 GDP today.
McKinsey also goes on to identify digital hubs across the continent in Amsterdam, Berlin, London, Dublin, Paris and Stockholm, further pointing out that European-founded companies Skype and Spotify are major global players (see chart).
Dr Jacques Bughin, director of MGI said, much more should be done if the region was to go beyond the current status quo of operating at 12 per cent of its potential, adding that 13 of the 15 most connected economies in the world are in Europe.
“With the right policy adoption at a national, sectoral and company level, the growth of digital could deliver massive benefits to the European economy and to its citizens; our own new analysis shows an additional 10 percent could be added to pan-European GDP (over €2.5tn) in 2025,” he added.
Europe’s digitisation is uneven
However, the report goes on to point out that digitisation across the region is uneven, with access to mobile and broadband services not universal across the continent. In addition, MGI’s Industry Digitisation Index demonstrates that in countries such as Germany, investments in such technologies are yet to translate to higher yield. Among the insights are:
- The United Kingdom operates at 17 per cent of its digital potential but Germany at 10 per cent
- Countries like the Netherlands are net exporters of digital services to Europe, while Italy is a net importer
- Europe as a whole is a net importer of U.S. digital services, running a digital trade deficit of 5.6 per cent of total EU-U.S. services trade
- The IT, telecoms, and digital media sectors are all at the forefront of the continent’s digital transformation
- Media and finance are close to the frontier, but large, traditional sectors in Europe lag far behind.
Eric Hazan, co-leader of Digital McKinsey, senior partner in McKinsey’s Paris office, and member of the MGI council, added: “We have compiled dozens of indicators to provide a picture of digital assets, uses, and workers. The index shows that Europe’s economy is digitising unevenly and that there are large variations among sectors with many of the largest, traditional sectors lagging behind the digital frontier, which is led by the information and communications technology (ICT) sector and media and finance.
“Our message to policy makers is that they can make a huge difference over the coming decade, particularly through education, in enabling the next generation and those in work today to gain skills, up-skill and re-skill to help drive the digital transition in Europe.”
Read more about the study here