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The coronavirus crisis has accelerated the digital transformation of Europe’s economy. Before the pandemic, cutting-edge digital technologies were primarily used by the most innovative and modern firms.

The COVID-19 crisis, however, brought the digital transformation to the larger society — and made digitalisation integral to firms’ survival. Close to half of firms in the European Union surveyed for the EIB Investment Survey (EIBIS), conducted from April to July 2021, said they responded to the pandemic by investing in digitalisation — for example by providing services online.

Digital firms were better able to cope with the disruption unleashed by the pandemic, and they were less likely than non-digital firms to see sales decline significantly from 2020 onwards. Many of them used the crisis an opportunity to accelerate their digitalisation. Digital firms are also more proactive in investing in climate change measures and adaptation, and they are making greater strides in improving the energy efficiency of their operations.

The rapid advancement of digitalisation in Europe, however, is exacerbating a digital divide that existed before the pandemic. Some EU firms – particularly small firms – risk being left behind, especially in regions where digital infrastructure is lacking. In fact, one in six EU firms consider access to digital infrastructure to be a major obstacle to investment.

To accelerate the pace of digital innovation and adoption, Europe needs to focus on three elements:

• creating an enabling ecosystem that encourages digitalisation;
• communicating a strategic vision for countering digitalisation imbalances across regions and countries; and
• providing adequate policy support to address gaps in finance and workers’ skills.

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About the report

Digitalisation in Europe 2021-2022: Evidence from the EIB Investment Survey is based on a unique, annual survey of 13 500 firms across EU members and the United Kingdom, as well as a sample of US firms that serves as a benchmark. Among other things, EIBIS collects data on firms’ use of advanced technologies specific to their sector. This information is used to determine a firm’s level of digitalisation. In addition, the report includes the EIBIS Corporate Digitalisation Index, which summarises indicators linked to digitalisation – such as the use of advanced technologies and uptake during COVID-19 – and firms’ assessment of digital infrastructure and investment.

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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.

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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.

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COVID-19 impact

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.

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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.

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