Executive Summary of the findings from the Oxford Economics Report

  • ICT has driven productivity and growth in developed countries over the past two decades.
  • Investment in ICT generates a bigger return to productivity growth than most other forms of capital investment. This “ICT Dividend” is estimated to contribute one-third of the overall annualised returns on ICT investment of 20% to 25%.
  • The “ICT Dividend” is dependent on accompanying investments in intangible capital (which includes organisational restructuring and employee know-how) and the local policy and regulatory framework.
  • Europe has fallen behind the world leader in investment in ICT— the US—since 1991. The US increased ICT investment as a proportion of GDP from 9% in 1991 to 30% in 2010. Europe’s ICT capital stock increased from 6-9% (near parity with the US) to 23% (approximately 25% behind the US) over the same timeframe.
  • The ICT investment disparity significantly affected Europe’s relative productivity. From 2000-2010, annual US productivity growth accelerated to close to 2%. In Europe, annual productivity growth decelerated to around 1% – half the US level.
  • Had Europe matched the US in its productivity growth since the mid-1990s, the gap in living standards would have closed by 25% by 2011, equivalent to an improvement in Europe’s GDP per head of just under €3,400. (Europe would close the gap fully by 2050).
  • The European productivity leaders are Scandinavia and the UK, which have invested most in ICT and have market conditions favourable to exploit it. Over the past 15 years, they have seen average labour productivity growth of between 1.7% and 2% a year.
  • Italy and Spain have made least effective use in Europe of ICT to drive productivity. Since 1995, annual labour productivity growth has averaged only 0.3% and 0.8% for Italy and Spain, respectively.
  • By raising its ICT investment, Europe could see significant economic growth and an “ICT Dividend” from accompanying productivity growth. If by 2020 Europe built its ICT capital stock to the same relative level as the US, EU GDP would increase by 5%, equivalent to about €760 billion at today’s prices, or around €1,500 per person. For some countries experiencing sluggish growth—such as Spain and Italy—the impact on GDP could be over 7%, or €100 and €140 billion, respectively, at today’s prices.
  • Government policy influences the effectiveness of ICT development, returns on ICT investment and the ability to generate productivity benefits. European governments would see considerable economic growth by prioritising ICT policy in their economic plans.
  • If Europe does not address its productivity gap, it will not only fail to catch up with the US but also will risk losing ground to emerging economies. Twice as many firms in developing economies plan to increase their investments in productivity-linked technologies by more than 20%.

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