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How to get European businesses to digitalise

Frederico Mollet

Date: 14/07/2021
Europe’s underperforming tech sector and reliance on foreign technologies has long alarmed its policymakers. But a significant – and often overlooked – factor in the EU’s economic underperformance over the last two decades is its slow business digitalisation. EU industry, especially SMEs, struggles with the prosaic challenge of integrating digital technologies into its business models and operations. The preoccupation tends to be on how to foster new digital start-ups. But what about the digitalisation of existing firms?

The EU budget and recovery fund are armed with a range of new EU funding streams and programmes to tackle this challenge. With its 2030 targets and new policy framework, the EU aims to catch up with the previous generation of digital technologies and ensure that it does not miss out on the next wave of transformational change. Otherwise, Europe will fall behind its economic competitors even further.

But there are still some gaps in the EU’s game plan for business digitalisation. Frederico Mollet outlines several areas where the new policy framework can be optimised, and new initiatives would be worthwhile:

  • Additional funding should be mobilised from Cohesion Policy funds. Business digitalisation is a critical factor in regional convergence, and so an increased funding share would be in line with the policy’s main objectives.
  • The Commission should use its coordinating and convening powers to get banks to commit to a best practice code, to assess digitalisation loans and improve their staff’s digital knowledge.
  • Public authorities should leverage private partners. Many firms lack the awareness and information necessary to digitalise, but a number of ‘access points’ and private sector networks (e.g. finance providers, B2B businesses, supply chain networks) can reach them.
  • The EU should consider complementing the design and implementation of European Digital Innovation Hubs and transition pathways – its main programmes for supporting business digitalisation directly – with 5 additional components.
Taken together, these recommendations will bolster the funding available for business digitalisation, tackle some of the critical barriers to finance, and optimise the delivery of the Commission’s programmes.

Read the full paper here.
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