If Europe increases its investment in ICT to match levels
elsewhere in the world, it could reap hundreds of billions of Euros of
additional GDP thanks to faster productivity growth, according to a new
research, commissioned by AT&T and conducted by leading independent
research company Oxford Economics.

ICT investment and productivity growth are closely
linked, and European countries are lagging other parts of the world in both.

European GDP could grow by an additional Euro 760
billion, or an extra 5 per cent above forecasts, if Europe matched total US ICT
levels by 2020. This would be worth around Euro 1,500 per person at today’s
prices. ICT driven innovation would contribute approximately one third of that
growth 1.5 per cent of GDP or around euro 220 billion.

For some countries currently experiencing sluggish growth
for example, Spain and Italy the impact on GDP could be over 7 per cent, or
euro 100 and euro 140 billion, respectively, at today’s prices.

“Productivity is the cornerstone of economic growth.
There is clear evidence that investing in technology can make European
companies more productive and competitive, which is critical to growth in these
tough financial times. This report helps us understand how technology drives
productivity, and how to maximise returns from ICT investments,” said
Andrew Edison, regional vice president for EMEA, AT&T.

As a percentage of GDP, Europe’s stock of ICT capital has
fallen to around two-thirds of the level in the US, the world leader, having
been close to parity in 1991.

This ICT investment gap has affected Europe’s
productivity growth significantly, which has averaged only half the US rate
since 2000.

Investment in ICT generates a bigger return to
productivity growth than most other forms of capital investment. This so-called
“ICT Dividend” is estimated to contribute around one-third of the
overall 20 per cent to 25 per cent returns on ICT investment.

The European productivity leaders are Scandinavia and the
UK. Over the past 15 years, they have seen average labour productivity growth
of between 1.7 per cent and 2 per cent a year.

Italy and Spain have made least effective use in Europe
of ICT to drive productivity.  Since 1995, their annual labour
productivity has averaged only 0.3 per cent and 0.8 per cent, respectively.

European governments would enable considerable growth by
putting more effective ICT policy at the heart of their economic agendas. It
would also help Europe stay ahead of emerging markets that are adopting
technology quickly.