Digital and technology

Europe’s AI and digital gap

Having already suffered from a digital gap keeping it at arm’s length of China and the USA, Europe is now beginning to suffer from an AI gap too, a new report has found.

McKinsey Global Institute estimate that if Europe “on average develops and diffuses AI according to its current assets and digital position relative to the world”, they could add €2.7 trillion, or 20 per cent, to the continent’s economic output by 2030. If it were to push past this level and bridge the gap between it and the USA, Europe would add €3.6 trillion to its GDP in that timeframe.

‘Notes from the AI frontier: Tackling Europe’s gap in digital and AI’ combined secondary sources and three global surveys at corporate and sector levels, with McKinsey compiling various suggestions for how Europe can catch up with the USA and Asia.

AI gap adding to digital gap

McKinsey analysis found that Europe is capturing 12 per cent of its digital potential, two thirds of the USA’s captured potential, largely unchanged from where it had been found to be in 2016. Europe’s ICT sector accounts for 1.7 per cent of GDP, as opposed to 2.1 per cent of China’s and 3.3 per cent of the USA’s.

However, Europe does have close to six million professional developers, more than the USA, so the workforce is in place for the development needed. The continent’s weakness lies in diffusion; early digital companies have tended to be the first to develop AI effectively, but only two of the top 30 firms in the world are European. Early stage investment is also lacking, with Europe only attracting 11 per cent of global venture capital and corporate funding in 2016, while the USA was attracting 50 per cent and Asia (mostly China) attracting the vast majority of the rest. These figures remained largely unchanged into 2018.

It is estimated that there is 12 per cent less adoption of big data architecture and advanced machine learning in Europe than there is in the USA. Where AI is being used in Europe, it is less broadly used; only 5 per cent of those using AI tool are using them in about 90 per cent of their organisations, as opposed to 8 per cent in the USA.

AI could boost economies

The €2.7 trillion boost to GDP would be “roughly double that of other general-purpose technologies adopted by developed countries in the past”. McKinsey say that “Europe may achieve a significant productivity boost through AI, without sacrificing employment in the long term” while acknowledging that large technological changes have historically cost jobs.

They contend that Europe stands to have a net gain in terms of employment, especially if they “innovate new products and new demand”.

EU performance

A clear gap in AI readiness exists within Europe also, with northern European countries ranking ahead of China and just behind the USA in terms of readiness, but with southern and eastern European countries lagging badly. Some countries have specific strengths on the index compiled by McKinsey, with Ireland topping the index for ICT connectedness and the UK topping the index on innovation.

McKinsey recommends five steps to accelerate Europe’s path to AI readiness: continue development of deep tech and AI start-up firms; accelerate the digital transformation in incumbent firms; complete work on the digital single market; develop the “right talent and skills”; and think “boldly” about how to guide society through the disruption that AI will bring.

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