A new study finds that European GDP could grow by an additional €760bn if Europe matched US ICT investment levels by 2020. Guy Daniels reports.
Research commissioned by AT&T and undertaken by Oxford Economics, finds that if Europe increases its investment in ICT to match total US ICT levels by 2020, then the resulting faster productivity growth would increase GDP by an additional €760 billion, or an extra 5 per cent above forecasts. The research suggests that this equates to €1,500 per person.
The report, which is available to download, suggests that Europe’s stock of ICT capital has fallen to around two-thirds of the level in the US, having been close to parity in 1991. This ICT investment gap has affected Europe’s productivity growth significantly, which has averaged only half the US rate since 2000.
It adds that investment in ICT generates a bigger return to productivity growth than most other forms of capital investment, and that this ‘ICT Dividend’ is estimated to contribute around one-third of the overall 20-25 per cent returns on ICT investment.
Adrian Cooper, CEO of Oxford Economics, says that government policy directly influences the effectiveness of ICT investment and its productivity benefits.
He says that firms in Europe stand to benefit significantly from increased investment in ICT:
“However, they must also consider the critical intangible assets – such as employee know-how and organizational improvements – that will allow them to wring the most value from their investments. Governments, meanwhile, must keep regulations up to date with advancements in technology to ensure maximum benefit across the EU.”
The Scandinavian countries and the UK are the region’s productivity leaders, according to the report, with average annual labour productivity growth of between 1.7 and 2 per cent over the past 15 years. Italy and Spain are the losers, averaging only 0.3 per cent and 0.8 per cent respectively in the same period. Andrew Edison, VP for EMEA at AT&T, commented that productivity is the cornerstone of economic growth:
“There is clear evidence that investing in technology can make European companies more productive and competitive, which is critical to growth in these tough financial times. This report helps us understand how technology drives productivity, and how to maximise returns from ICT investments.”
Fabio Colasanti, president of the International Institute of Communications and senior adviser at the European Policy Centre, added:
“There is a dire need for Europe to improve its productivity, and investment in ICT is the trump card to achieving this. But national governments must prioritise ICT investment more effectively and focus on creating the right conditions for investment. Policymakers should take notice and do all they can to ensure the digital agenda in Europe is given the push it needs.”
According to the report, key measures that would improve productivity include harmonising data protection laws across the EU, reviewing regulations around data sharing and keeping policies up to date with technological developments.
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