Firms in Europe have fallen behind the US in the AI arms race, according to a survey from Accenture, which found 56% of 800 large European companies surveyed said they have yet to see true transformation from an AI investment.
In a scathing report from last year on the future of European competitiveness, Mario Draghi, former president of the European Central Bank, laid bare the weak productivity growth in the EU and the widening gap between the GDPs of the EU and the US.
The report was a wakeup call for Europe – and the cherry on top came shortly after: US Vice President JD Vance’s speech at the Paris AI Summit in February ripping into European regulations and basically asserting dominance in the AI arms race, in which he proclaimed “America is the leader in AI and this administration intends to keep it that way.”
Source: Accenture Research
Largest companies dominate in AI
The hard truth is that European workers are less productive than their US counterparts. In order to remedy that and attempt to close the gap, the Accenture report suggests EU companies accelerate AI adoption. That should include not just adopting tools, but bring in the right talent and reinventing data governance.
The largest European companies scored 54 out of 100 on Accenture’s index of development and deployment of AI capabilities. Though that is roughly equal with US peers, those in the next revenue bracket down score just 39. This gap makes a significant difference to progress.
To put it another way: If the AI capabilities of all European companies with over $1 billion in yearly revenue were on par with those of the companies leading in AI, it would add nearly $225 billion to annual business revenues, according to analysis from Accenture. That is an enormous amount, which is equal to about the size of Hungary’s GDP.
Source: ECB; Accenture analysis
European productivity falls
Competitiveness has been a hot button item among politicians in the EU in recent years. Supply chains have been damaged and government budgets stretched thin as inflation and energy prices rise. The Covid-19 pandemic and the Russian invasion of Ukraine were big blows to the European economy, only worsened more recently by even more conflict in the Middle East.
“The past four years have proven beyond a shadow of a doubt the importance of strengthening our competitiveness,” is how European Commission President Ursula von der Leyen put it in a press conference last year.
In 1996, labor productivity in the US and Europe was equal, but by 2005, the average European worker produced only 85% of their American counterparts’ output. Today that percentage has fallen further to 76%.
Putting aside shocks from inflation and geopolitical conflict, slower adoption of technology is likely the main culprit in this slump of European productivity. In sectors with higher-intensity use of tech, productivity climbed by 120% in the US, compared with less than 50% in Europe. This compares with 20% and 5% in lower-intensity use sectors, respectively.
Source: Accenture Research
Differences across sectors and countries
So, who comes out on top in terms of using AI for more value? The report shows that AI capabilities are strongest in the automotive industry and, when it comes to different European countries, Switzerland was ranked the most capable in AI.
That automotive is already big on AI is hardly a surprise, considering that it is one of the largest industries in the EU and, as we have already seen, the largest companies are the one that have seen the most success implementing AI.
The aerospace and defense, life sciences, and industrial sectors also get a notable mention for scoring above the European average in the Accenture index for AI capabilities. Besides Germany, the UK and France were also judged to have stronger AI capabilities than other EU nations like Spain, Italy, and others.
The industrial sector holds and interesting position in the analysis. The sector accounts for more than a quarter of regional GDP, and plays a central role in areas like the energy transition and the deployment of physical AI via robotics. Today, European companies hold more than half of the market for automation solutions needed for industrial AI deployment.
“Recent geopolitical shifts and the rapid, jarring realignment of global trade relationships have served to highlight Europe’s reliance on the US for everything from cloud infrastructure to foundation models,” said Mauro Macchi, CEO for Europe, Middle East and Africa at Accenture.
“The EU has already identified several strategic use cases – across healthcare, defense and transportation, amongst others – for which it wants to provide sovereign solutions. Local providers could be scaled up via streamlined permitting and grid access for infrastructure, investment in talent pipelines, demand incentivization and strategic procurement.”
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