Europe chart of the week: AI leaders and laggards

• Interest in generative artificial intelligence (AI) has been supercharged by ChatGPT, a natural language processing tool developed by US-based OpenAI, which reached 100m users just two months after its release in November 2022 as speculation about its potential usefulness surged. Business use cases are proliferating, led by efforts to optimise service operations, and take-up is set to accelerate sharply over the next 12 months. This is just one facet of Europe’s adoption of AI: in 2021, 28% of large EU firms (with over 250 employees) were using AI in some way, with the figure for all firms in the economy standing at 8%. 

• Regional differences are substantial. The Nordic countries lead on digital readiness, with 24% of firms in Denmark using AI; in contrast, Romania has the lowest take-up, at just 1% of firms. Countries with a thriving tech sector are further ahead. This explains the strong take-up rates for Portugal (17%) and Germany (11%). Separate national government data suggest that the UK ranks highly (15%), reflecting the fact that London’s start-up ecosystem is ranked third in the world (after Silicon Valley and New York City) by Startup Genome, a US research and policy advisory firm. Slovenia (12%) also scores well owing to a long-standing academic and research focus on AI.

• Among the EU’s goals is a target of 75% of firms to be using cloud computing, AI or big data by 2030. This forms part of the Digital Decade policy programme, which is in receipt of €127bn out of a total of €490bn allocated so far under the post-pandemic Recovery and Resilience Facility that runs to 2026. The EU’s policy plans are ambitious, and will foster a surge in digital infrastructure investment in the coming years, but we do not expect these targets to be met. The €127bn equates to less than 1% of EU GDP, and to be effective it would need to be paired with top-priority national-level plans, incentives for small and medium-sized firms (for many of whom the business need will be less pressing), and substantial investment in training. None of these are currently forthcoming at the scale needed. Moreover, upcoming EU regulations on AI may soon restrict use.  

• The biggest challenge is that digital skills are in short supply in the EU. Lay-offs from the tech sector, which is struggling with higher interest rates and a downturn in venture-capital funding, could help to reallocate digital talent across the economy, boosting digitalisation in sectors such as healthcare and manufacturing that have struggled to attract such workers. But skills shortages are likely to remain the biggest constraint on firms’ digital and AI investment in the short to medium term. 

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.