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Technology and talent are key to Europe’s economic future

By EY

With political unrest and economic uncertainty at every turn, Europe feels like it’s facing an unpredictable future. But when investors evaluate prospects, it’s clear: Digitization will be the continent’s core engine of growth and investment. The numbers prove this out. According to the EY Europe Attractiveness Survey 2019—Technology, the volume of digital sector FDI projects hit an all-time high, doubling over the last five years to 1,224. Tech employment across the European Union grew 4%—significantly more than the overall 1.1% employment growth.

EY teams surveyed 506 investors between January and February, and the consensus shows that the digital economy sector is at the top in terms of its potential to drive economic growth across Europe in the coming years. “Europe’s capacity to hold its attractiveness and capture future growth is tied to its path to becoming a digital leader,” noted Andy Baldwin, EY EMEIA Area Managing Partner and EY Global Managing Partner Client Services—elect.

The big question is how can Europe house tech giants in the same way the US, China, and Japan are?

Europe is home to more than a third of the top 25 cities around the globe ranked most likely to produce the next tech leader. When asked which cities offer the best chance of producing the next Google, investors ranked London fourth globally, behind only Silicon Valley, Shanghai, and Beijing. Cities that have previously flown under the commercial radar are now proving to be worth another look. Berlin ranks seventh globally and second in Europe, while Paris ranks twelfth globally and third in Europe. “The convergence of technologies, processes, data, assets, and people is giving rise to innovation hubs across Europe,” noted Baldwin. We are seeing London, Berlin, Paris, Stockholm, and Amsterdam lure people with in-demand, hot skills. These are primarily benefiting the agriculture, manufacturing, financial services, health, and transport industries.”

The big question is how can Europe become home to the technology giants in the same way the US, China, and Japan are? Considering that innovation and digital culture are key factors for investment, talent has become a strategic issue. Among the investors surveyed, 94% reported that the availability of tech skills drive their investment choices, with 52% calling it “critical”.

The continent’s ability to remain globally competitive is directly linked to its tech and talent agenda.

Today, Europe lacks many important digital skills. Cybersecurity, AI and robotics, and big data and analytics are considered most scarce. This dearth of talent dampens growth prospects, hinders productivity, and undermines profitability, according to businesses. “Without adapting the talent agenda to the pace of technological change, businesses are at serious risk of becoming quickly obsolete,” Baldwin continued. “Therefore, the lack of digital skills has an immediacy on growth prospects and profitability that other areas do not.”

Another priority shaping Europe’s readiness for the new digital economy is quality infrastructure. Most European countries have rolled out 4G extensively, but now the world is already looking to the next generation. 5G promises speedier, more reliable connections that work for several devices at once. It’s beginning to be rolled out but should saturate the market by 2020 or 2021. And if Europe wants to stay relevant, they need to invest in these networks now.

The continent’s ability to remain globally competitive, attract foreign investment and skilled resources, and lead the way in innovation is directly linked to its tech and talent agenda. So it is critical that they address key skills gaps and invest in a robust infrastructure to build a stronger, sustainable, future-proof Europe.

Is your business ready to keep pace with the new digital economy? Find out.

This article was produced on behalf of EY by Quartz Creative and not by the Quartz editorial staff. Sources are provided for informational and reference purposes only. They are not an endorsement of EY or EY products.