Europe is getting its IT act together but renewed push is required, says report

Impact of IT on productivity shows in latest Digital Competitiveness study

Europe's digital economy is crucial to economic growth and prosperity

ICT has driven half of the productivity growth in Europe over the past 15 years, but Europe must step up a gear if it wants to fully exploit the potential benefits of the digital economy, according to a Digital Competitiveness report published today by the European Commission.

The report says that to be more competitive, member states must provide faster broadband “and an internet people can trust”, improve citizens' skills and encourage more ICT innovation.

"Europe's digital economy is crucial to economic growth and prosperity,” said Digital Agenda commissioner Neelie Kroes. “ICT and high-speed internet are as revolutionary in our lives today as the development of electricity and transport networks were over a century ago. But we need support for further internet development so that all citizens can benefit from the digital economy."

The report analyses recent developments in ICT and provides significant evidence for the design of a Digital Agenda for Europe, the first European Commission flagship initiative to be launched shortly under the Europe 2020 strategy for smart, sustainable and inclusive growth.

The report identifies the ICT sector as one of the key drivers of the European economy. Data for 2004-07 suggests that ICT investment has started to deliver efficiency gains in the economy as whole. The value added by the ICT industry to the European economy is about €600bn (£515bn), 4.8 per cent of GDP.

The IT sector accounts for 25 per cent of the total business investments in R &D in the EU, but benefits from IT in the US are greater. Europe needs structural reforms and a consistent digital agenda to unleash similar impacts, says the report.

About 60 per cent of the EU's population use the internet regularly and 48 per cent on a daily basis, the report finds. These levels compare well with the US where 56 per cent use the internet daily. Nevertheless, in both blocs about one third of the population has never been online and this group is dominated by the elderly and poorly educated.

In 2009 the EU broadband market was the world's largest. Almost a quarter of EU citizens have a fixed broadband subscription. Although connection speeds are increasing, with 80 per cent of fixed broadband lines in the EU now offering speeds of more than 2Mbit/s, only 18 per cent of them are more than 10Mbit/s. Europe 2020 set ambitious targets for all Europeans to have access to broadband of 30Mbit/s or more.

The EU lags significantly behind countries such as Korea and Japan in the deployment of next-generation access networks. Migration to higher broadband capacity is an important structural challenge for the whole telecoms sector, says the report.

The level of e-commerce varies across member states and cross-border transactions are limited, according to the report.

Although 54 per cent of internet users buy or sell goods via the internet, only 22 per cent of them do so from other EU countries.

By contrast, in the US e-commerce is more common, with 75 per cent of internet users buying or selling online. A genuine digital single market is essential to stimulate the growth of European small and medium-sized enterprises and to provide consumers with more choice at competitive prices, the report says.