The European Commission's Digital Decade initiative sets ambitious targets to make Europe a digital leader by 2030. These targets align with four key areas: skills, public administration, infrastructure, and business transformation. Our research suggests European businesses are on track to meet the Digital Decade target that 75% of EU companies use AI in their business practices. Yet, beneath this headline figure lies a more complex reality; startups[1] are pulling ahead in innovation and most larger businesses[2] are stuck in shallow adoption, focusing on incremental gains.
Executive summary
The Digital Decade vision
The European Commission's Digital Decade initiative sets ambitious targets to make Europe a digital global leader by 2030. These targets align with four key areas: skills, public administration, infrastructure, and business transformation.
Our research suggests European businesses are on track to meet the Digital Decade target that 75% of EU companies use AI in their business practices. Yet, beneath this headline figure lies a more complex reality; startups[1] are pulling ahead in innovation and most larger businesses[2] are stuck in shallow adoption, focusing on incremental gains.
The AI revolution takes hold, but a two-tier economy is beginning to emerge
42% of European businesses are now consistently using AI; adoption has grown by 27% in only twelve months.
Every minute, somewhere across the continent, more than five businesses adopt AI for the first time. This remarkable pace equates to nearly three million businesses across the continent in the past year.
For businesses that have adopted AI, a striking majority (93%) say their revenue has increased.
On average, these businesses have seen an average 31% boost in revenue, demonstrating the tangible benefits of integrating AI into operations.
Impressively, 95% of businesses have seen significant productivity gains thanks to AI. The technology has also enhanced automation and efficiency (44%), improved customer experience (43%), and improved decision-making and insights (38%).
Our research reveals two distinct paths emerging in Europe's AI journey. Only 13% of larger businesses are harnessing AI's deeper potential to deliver an entirely new product or service, lagging behind startups (37%).
The growth in adoption is matched by growing public enthusiasm for AI. Citizens across Europe are increasingly aware of the technology's transformative potential: 78% believe it will transform education, 61% see it revolutionising healthcare, and 64% anticipate its transformative impact on agriculture.
A growing digital divide could shape Europe’s future, with large businesses focusing on efficiency ahead of innovation
Our research reveals that while 53% of large businesses are consistently using AI, only 14% have implemented the most advanced operations.
Startups report that AI plays a central part in their business operations, with 38% reporting that their business proposition is based around AI or that they are heavily reliant on it for their core service.
Our report identifies three stages of adoption from first steps to strategic reinvention. Currently, 73% of large businesses and 56% of startups are at the most basic stage of AI adoption, compared to 14% of large businesses and 26% of startups who are at the most advanced stage.
This two-tier pattern is clearly visible in AI investment strategies: Currently, 72% of startups report having a dedicated AI budget, compared to just 58% of large businesses, highlighting a clear distinction in resource allocation.
Startups are leading in innovation, harnessing AI to deliver new products for their customers, but require further support to continue thriving
Startups look for direction from public sector organisations - 92% of startups are more likely to adopt AI when the public sector does, compared to only 46% of small businesses.
Startups in particular require clear pathways to venture capital and funding options, with 56% of startups identifying it as a critical factor for faster growth.
92% of startups believe Europe is competitive as a global startup hub compared to other regions, such as the US or Japan.
The key features of the European landscape that make it competitive as a global hub for startups are high levels of education and a skilled workforce (64%), strong legal protections for data privacy and security (59%), and access to a large and diverse consumer market within the EU (48%).
While 37% of adopters report that they source capabilities and expertise from internal development, almost a third (32%) work with external providers or consultants. The most common support provided by these external partners is more advanced AI capabilities (56%), improved cybersecurity (54%), and support with data handling (43%).
Startups reported that the UK was the European country with the most start-up-friendly business environment, closely followed by Estonia and Germany.
Breaking down barriers to accelerate depth and breadth of AI adoption will enable Europe to compete on a global stage.
Our research reveals four critical barriers that are restricting Europe's AI transformation:
Businesses report regulatory uncertainty as a key barrier: 44% of European businesses cite regulatory uncertainty as their primary barrier to AI adoption, with fragmented rules across borders creating particular challenges. Businesses estimated that €40 out of every €100 their company spends on IT is reserved to compliance-related costs.
There is a critical AI skills gap: 40% of businesses report a lack of digital skills to be an AI adoption barrier, and 13% report it as the main barrier holding them back. The digital skills barrier hinders innovation for 56% of businesses; a further 53% see this barrier increasing operational costs, and 46% see it slowing growth.
For many businesses, especially SMEs, the perception around the cost of implementation holds some back: 31% of SMEs cite high implementation cost as a major barrier.
While European citizens show growing enthusiasm for AI, concerns remain: Over 10% of citizens reported that the fact that many everyday technologies use AI without their knowledge makes them feel less positively about the technology. This group pinpoints specific concerns, including questions about privacy and data collection (66%), the technology feeling invasive (63%), and worries about manipulation or being presented with biased content (48%).
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Working in online documents
(reported by 74% of businesses)
Online data storage or file sharing (70%)
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Data back-up and disaster recovery (59%).
Cloud computing
88% of businesses are aware of cloud computing - of these, 59% are very familiar with the technology.
The most common business uses for cloud computing are:
The adoption trends outlined above show that European businesses are on track to meet the Digital Decade targets ahead of schedule, including 75% of businesses using AI by 2030.
However, while adoption figures continue to rise, a gap is emerging between large, established businesses and startups, with startups leading the way in innovation and depth of adoption. In order to fully realise the benefits promised by AI, this report outlines a set of recommendations aimed at creating the right conditions to encourage companies of different sizes and levels of technological sophistication to use AI and transform their sectors and businesses.
Summary recommendations:
Three-point plan
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1. Create a pro-growth regulatory environment that incentivises adoption and innovation
By addressing European businesses' concern about the cost and compliance complexity associated with new regulations, Europe can overcome a key barrier to digital transformation.
2. Accelerate digital transformation across European industry
To accelerate private sector digital adoption, Europe needs to establish a virtuous cycle of investment and growth, centred around digital transformation and a skilled workforce. A renewed emphasis on updating business processes, applying innovations commercially and investing in R&D can help European companies recapture their start-up zeal and drive European competitiveness globally.
3. Turn European governments into leading adopters of digital technology
European governments must evolve from technology followers to digital leaders. While public administrations are respected for their democratic values, they lag behind global peers in the adoption of cutting-edge technology. Taking the lead on digital transformation will meet citizens’ expectations regarding how new technologies can improve their daily lives and catalyse technology adoption and innovation in the wider economy.
1. A business founded in the last 2 years which provides a new product/service or innovation and is aiming for rapid growth in terms of employees and turnover.
2. A large enterprise (also referred to as a large business or established enterprise) is a business with 500 or more employees, founded 10 years ago or more.