GenAI Could Add €1.4 Trillion to the EU’s GDP by 2034

Generative AI could add between €1.2 and €1.4 trillion to the E.U.’s gross domestic product within a decade, the equivalent of 8% of growth a year, a new Google report claims.

The gains would come from employee productivity increases, the free time created from automating tasks, and the re-employment of people who once handled those tasks.

The report, The economic opportunity of AI in the E.U., was prepared by Implement Consulting Group using economic modelling approaches developed by Goldman Sachs investment bank. It presents a compelling case against the over-regulation of AI within the bloc.

It estimates that 61% of jobs will be augmented by GenAI, resulting in up to €1.1 trillion worth of productivity boosts. Around 7% of jobs will be completely automated, and the re-employment of workers into new roles will bring in up to an additional €350 billion. The analysts then reduce the total by at least €50 billion to account for potential productivity losses resulting from GenAI.

Polls also found that 74% of all workers in European countries already report productivity enhancements as a result of GenAI.

“Generative AI can boost productivity across sectors by augmenting and improving human capabilities,” said Martin H Thelle, a partner at Implement Consulting. “In contrast to past automation, such as robots, generative AI can boost productivity in services, where 80% of its economic potential lies.”

EU is not technologically competitive with the rest of the world

The Google research refers to a September report by former European Central Bank President and economist Mario Draghi that claims a slowdown in European productivity has hindered growth in the region. The E.U.’s GDP was only $280 billion higher than the U.S.’s in 2009, but the gap has since widened and the U.S.’s was $9 trillion higher in 2023.

Draghi says this is largely due to the E.U.’s lack of competitiveness with other global regions in terms of innovation, especially with advanced technologies. E.U. companies tend to specialise in mature technologies with limited potential for breakthroughs. As a result, they spent €270 billion less than U.S. equivalents on research and innovation in 2021.

Despite the top three R&I investors in Europe being in tech, “we are failing to translate innovation into commercialisation,” according to Draghi, pushing entrepreneurs to the U.S. Now, only four of the world’s top 50 tech companies are European, and the U.S. dominates in AI, cloud, and quantum.

SEE: UK Government Scraps £1.3bn Earmarked for AI and Tech Innovation

Indeed, the Google report demonstrates the E.U.’s lack of competitiveness through three main metrics: the productivity gap, research and development shortfalls, and falling behind with AI.

Europe has maintained a 20% productivity gap with the U.S. since 2010, Implement researchers found, and spends only 2% of its GDP on research. In comparison, the U.S. spends 3%, and South Korea and Israel spend over 5%.

The region also lags in AI innovation. Only 34% of E.U. businesses used cloud computing technologies in 2022, a critical enabler for AI developments, which is vastly behind the European Commission’s target of 75% by 2030. Europe only filed 2% of global AI patents in 2022, while China and the U.S., the top two largest producers, filed 61% and 21% respectively.

The researchers behind the Google report used data from the Tortoise Global AI Index to assess how well the E.U. performed on key AI adoption drivers. The results shows that the E.U. actually is strong in its infrastructure, government strategy, and operating environment, with the latter referring to factors such as trust and data governance.

However, it also confirms the region’s AI innovation struggles, as it performs badly in talent, research, development, and commercial uptake.

“Present gaps indicate that the EU risks falling behind the next wave of AI and needs to ramp up its efforts to remain competitive,” the authors wrote.

Google recommends that Europe invests in AI research to make it more accessible, build renewably-powered AI infrastructure, invest in digital skills programmes, and develop outreach strategies that promote AI adoption.

Regulation is to blame, says Google

Both the Google and Draghi reports place significant blame on E.U. regulations for the region’s struggles to innovate in advanced technologies.

“Innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations,” Draghi wrote. Over half of SMEs cite regulatory obstacles as their biggest challenge due to the administrative burdens they place.

Draghi adds that inconsistent regulations across E.U. member states limit cross-border operations and hampers innovation by preventing companies from scaling up.

“Since 2019, the EU has introduced over 100 pieces of legislation that impact the digital economy and society. It’s not just the sheer number of regulations that’s the challenge — it’s the complexity,” said Matt Brittin, president of Google EMEA, in a blog post. “Moving from the regulatory-first approach can help to unlock the opportunity of AI.”

However, the Google report does acknowledge the need for some form of regulation, urging the E.U. to “create conducive and aligned AI regulation and global governance,” which include privacy and security principles for safeguarding personal data.

SEE: Deloitte: 50% More Professionals Rank Data Privacy as a Top GenAI Concern in 2024

This is not the first time that Google has spoken out about AI regulation. Just last month, Debbie Weinstein, the company’s U.K. managing director, criticised the laws in the U.K. that prevent AI models being trained on copyrighted materials, saying it’s a block to development.

Big Tech faces pressure from AI regulations, risking market losses

Boasting 448 million people, the E.U. represents a large market for the world’s biggest tech companies. However, the implementation of the rigid AI Act and Digital Markets Act has deterred them from launching their latest AI products in the region.

In June, Meta delayed the training of its large language models on public content shared by adults on Facebook and Instagram in Europe after pushback from Irish regulators. Meta AI, its frontier AI assistant, has still not been released within the bloc due to its “unpredictable” regulations.

Apple will also not be making its new suite of generative AI capabilities, Apple Intelligence, available on devices in the E.U. initially, citing “regulatory uncertainties brought about by the Digital Markets Act,” via Bloomberg.

The DMA prevents big tech companies from abusing their dominant market position, and the E.U. is not alone in keeping an eye on competitiveness within the AI sector. In July, regulatory bodies from the U.S., U.K., and E.U. released a statement of combined intent to study whether the AI industry allows for sufficient competition.

Representatives from Meta along with Spotify, SAP, Ericsson, Klarna, and more also signed an open letter to Europe last month expressing their concerns about “inconsistent regulatory decision making” and that Europeans will miss out on AI innovations as a result. SAP’s CEO told Financial Times this week that he is “totally against” regulating AI in Europe.

The E.U. AI Act came into force on Aug. 1 and imposes strict requirements on high-risk AI systems to ensure safety, transparency, and ethical usage. Non-compliance could result in fines ranging from €35 million or 7% of global turnover to €7.5 million or 1.5% of turnover.

Many companies are relenting to the regulations, despite the challenges they present. Over a hundred, including Amazon, Google, Microsoft, and OpenAI, have already signed the E.U. AI Pact and volunteered to start implementing the Act’s requirements ahead of legal deadlines. This both demonstrates their commitment to responsible AI deployment to the public and helps them avoid future legal challenges.