Generative AI could contribute up to 1.4 trillion euros to the EU’s GDP by 2034

According to a new Google report, generative AI could contribute between €1.2 and €1.4 trillion to the EU’s gross domestic product within a decade, growing at 8% per year.

The gains would come from increases in employee productivity, free time gained from automating tasks, and rehiring people who previously completed those tasks.

The report, “The Economic Opportunity of AI in the EU,” was prepared by Implement Consulting Group using economic modeling approaches developed by investment bank Goldman Sachs. It is a convincing argument against the over-regulation of AI within the Union.

It is estimated that 61% of jobs will be expanded through GenAI, leading to productivity gains worth up to €1.1 trillion. Around 7% of jobs will be fully automated and re-employing workers into new roles will generate up to an additional €350 billion. The analysts then reduce the total by at least 50 billion euros to take into account possible productivity losses due to GenAI.

Surveys also show that 74% of workers in European countries have already reported productivity improvements thanks to GenAI.

“Generative AI can increase productivity across industries by augmenting and improving human capabilities,” said Martin H. Thelle, partner at Implement Consulting. “Unlike previous automation, such as robots, generative AI can increase productivity in the service sector, where 80% of its economic potential lies.”

The 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 hampered growth in the region. The EU’s GDP was only $280 billion higher than the US in 2009, but the gap has widened since then and the US GDP was $9 trillion higher in 2023.

Draghi says this is largely due to the EU’s lack of competitiveness compared to other world regions in terms of innovation, particularly in advanced technologies. EU companies tend to specialize in mature technologies with limited potential for breakthroughs. As a result, they spent €270 billion less than US equivalents on research and innovation in 2021.

Although the three largest R&I investors in Europe are active in technology, “we are not able to translate innovation into commercialization,” said Draghi, which is pushing entrepreneurs to the US. Now only four of the world’s 50 largest tech companies are European, and the US dominates in AI, cloud and quantum.

SEE: UK government cuts £1.3bn earmarked for AI and tech innovation

In fact, the Google report shows the EU’s lack of competitiveness through three main indicators: productivity gap, research and development deficits and AI lag.

Europe has been 20% behind the US in productivity since 2010, according to Implement researchers, and spends just 2% of its GDP on research. In comparison, the US spends 3%, while South Korea and Israel spend over 5%.

The region is also lagging behind in AI innovation. Only 34% of EU companies used cloud computing technologies in 2022, a key enabler of AI developments, well short of the European Commission’s target of 75% by 2030. Europe filed only 2% of global AI patents in 2022, while China and the US The US, the 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 EU performed on key drivers of AI adoption. The results show that the EU is indeed strong in its infrastructure, government strategy and operating environment, the latter referring to factors such as trust and data management.

However, it also confirms the region’s difficulties in AI innovation, performing poorly in talent, research, development and commercial use.

“The current gaps suggest that the EU is at risk of falling behind the next wave of AI and needs to step up its efforts to remain competitive,” the authors write.

Google recommends that Europe invest in AI research to make it more accessible, build AI infrastructure with renewable energy, invest in digital skills programs and develop outreach strategies that promote AI adoption.

Regulations are to blame, says Google

Both the Google and Draghi reports blame EU rules largely for the region’s difficulties in innovating in advanced technologies.

“Innovative companies seeking to expand in Europe are hampered 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 burden involved.

Draghi adds that inconsistent regulations across EU member states limit cross-border activities and hinder innovation by preventing companies from expanding.

“Since 2019, the EU has passed over 100 laws that impact the digital economy and society. The challenge is not just the sheer number of regulations, but also the complexity,” said Matt Brittin, president of Google EMEA, in a blog post. “Moving away from the regulation-first approach can help unlock the opportunities of AI.”

However, the Google report recognizes the need for some form of regulation and calls on the EU to “establish conducive and aligned AI regulation and global governance” that includes privacy and security principles to protect personal data.

SEE: Deloitte: 50% more professionals rank privacy as top GenAI concern in 2024

This isn’t the first time Google has spoken out about AI regulation. Just last month, Debbie Weinstein, the company’s UK managing director, criticized laws in the UK that prevent AI models from being trained on copyrighted material, saying it was a barrier to development.

Big Tech is under pressure from AI regulations and risks market losses

With 448 million inhabitants, the EU represents a large market for the world’s largest technology companies. However, the implementation of the strict AI law and the Digital Markets Act has prevented them from launching their latest AI products in the region.

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

Apple also will not initially make its new suite of generative AI features, Apple Intelligence, available on devices in the EU, citing “regulatory uncertainties caused by the Digital Markets Act,” according to Bloomberg.

The DMA prevents big tech companies from abusing their market dominance, and the EU is not alone in keeping an eye on competitiveness in the AI ​​sector. In July, regulators from the US, UK and EU published a memorandum of understanding to examine whether the AI ​​industry allows sufficient competition.

Representatives from Meta, as well as Spotify, SAP, Ericsson, Klarna and others, also signed an open letter to Europe last month expressing concern about “inconsistent regulatory decisions” and that Europeans were missing out on AI innovations as a result. SAP’s CEO told the Financial Times this week that he is “totally opposed” to regulating AI in Europe.

The EU AI law came into force on August 1st and imposes strict requirements on high-risk AI systems to ensure security, transparency and ethical use. Failure to comply can result in fines ranging from €35 million or 7% of global turnover to €7.5 million or 1.5% of turnover.

Many companies are complying with regulations despite the challenges involved. Over a hundred, including Amazon, Google, Microsoft and OpenAI, have already signed the EU AI Pact and agreed to start implementing the law’s requirements before the legal deadlines. This both demonstrates their commitment to responsible public use of AI and helps them avoid future legal challenges.