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Digitalisation in the European Union
The pandemic forced firms to shift much of their business and operations online. Some of those measures — services provided remotely, teleworking and online meetings — are likely to stay. Businesses realised, somewhat abruptly, that digitalisation was vital to preventing service disruptions, organising work remotely, improving communication with customers, suppliers and employees and selling products and services online.
- 46% of firms in the European Union said they took action to become more digital, according to EIBIS results.
- However, significant differences exist across firm size classes, industries and countries. In Western and Northern Europe, 48% of firms reported taking steps or investing to become more digital, compared with 43% in Southern Europe and 37% in Central and Eastern Europe.
- While digital uptake has increased overall, the adoption of new advanced digital technologies is stalling. The share of EU firms implementing advanced digital technologies – 3-D printing, advanced robotics, the internet of things, big data analytics and artificial intelligence, drones, augmented or virtual reality, or platforms – increased significantly from 2019 to 2020. However, the share stayed more or less constant from 2020 to 2021, reaching 61% in 2021, compared with 63% 2020 and 58% in 2019.
Europe vs. the United States
The European Union lags behind the United States in digitalisation. Furthermore, the share of firms using advanced digital technologies is higher in the United States (66%) than in the European Union (61%). If policymakers want to close the gap in adoption rates between EU and US firms, they need to help European firms grow to a sufficient size, as large firms tend to be more digital.
- In the European Union, 53% of firms that had already adopted advanced digital technologies invested further in digitalisation during the pandemic. This compares to 34% of EU firms that were non-digital and used the crisis as an opportunity to begin investing in their digital transformation.
- A widening digital divide also exists in the United States, but non-digital firms were more dynamic. 64% of US firms that had already adopted advanced digital technologies invested further in digitalisation, while 48% of US firms that were non-digital started investing in digital technologies during the crisis.
- A substantial share, 26%, of EU firms are in the “neither” category (no digital investment whatsoever), while only 18% of US firms have failed to invest.
The large share of EU firms not investing in digital technologies is worrying and could weigh on firms’ future competitiveness. About one in three employees in the European Union works for a firm that neither adopted advanced digital technologies nor invested in digitalisation, compared with about one in five in the United States.
Not only were digitalised firms better able to cope with the pandemic, the crisis also spurred digitalisation overall and forced firms to find efficient ways of incorporating digital technologies into their processes. While small firms responded to the crisis by accelerating changes they had already planned, larger firms with more than 50 employees were more likely to invest more in digital technologies.
- The digital divide between firms could expand over time. Looking ahead to the next three years, digitally advanced firms say their top investment priorities are expanding capacity and developing new products, processes or services.
- Non-digital firms, however, say replacing buildings, machinery, equipment and IT is a bigger worry.
- About 20% of non-digital firms do not have any plans to invest in digital tools.
Climate change preparedness
The more advanced firms are with digitalisation, the more likely they are to invest in climate change solutions and prevention. Digital tools will be essential in facilitating Europe’s transition to a green economy. Smart urban mobility, precision agriculture, sustainable supply chains, environmental monitoring and disaster prediction will help firms and societies address climate change’s impact. Digital technologies could also be instrumental in improving the efficient use of resources.
- Advanced digital firms report more often that they have already invested in climate adaptation and will invest more in the next three years.
- Digitally advanced firms are also more likely to invest in measures to improve energy efficiency. 59% of firms in the “both” digitalisation category have invested in energy efficiency measures, compared with only 50% of US firms in the same category.