The future of technology in Europe

• US and Chinese tech giants dominate the European market as key technology and platform providers. They set standards and, in some cases, offer their own ecosystems and exclusive services.
• Hyperscalers provide large-scale cloud services with comprehensive infrastructure, serving as platforms for AI and other new technologies. In 2025, US-based cloud providers held 85% of the European market³.

• Include new companies and research-intensive SMEs where they are taking on a creative role in the European technology industry and are the producers of digital innovation.
• Tech hubs such as Berlin, Paris, Amsterdam, Stockholm, London, Munich and Barcelona offer a dense ecosystem for innovation.
• Their global competitiveness depends heavily on access to capital and skilled talent.
• Operating in a European environment where prevailing mindsets and cultural factors within the broader ecosystem often limit incentives for companies to scale and mature beyond the start-up and growth phases, with many founders prioritising early exit strategies over long-term expansion.

• Particularly mechanical and plant engineering, but also the automotive sectors, are evolving from product manufacturers to digital service providers, closely linked with European tech companies.
• They bring distinctive domain knowledge but face increasing competition from international players.
  

• Crucial for developing the digital skills of future generations and addressing talent shortages. Europe’s strong education system provides a foundation on which to build future growth in the coming decade.
• Initiatives such as Horizon Europe, Erasmus+ and the European Universities Initiative promote cross-border research cooperation and talent mobility.
• They conduct successful basic research but often need to undergo digital transformation themselves.

• EU and national policies alike determine digital investment priorities and influence the shaping of the market environment.
• They determine the framework for competition, innovation, data protection, AI governance and technological sovereignty.
• Europe’s multi-level governance (EU, national, regional) offers both coordination challenges and opportunities for differentiated approaches.

• Actors such as the European Commission, the EIB (European Investment Bank) and the EIC (European Innovation Council) drive strategic investments and policy framework.
• Programmes such as Digital Europe, the European Chips Act and InvestEU mobilise significant resources for digital transformation.
• These supranational actors enable economies of scale and coordinated measures that individual member states would not be able to achieve on their own.

While AI will be well established in Europe within a decade, the evolution of ethical and regulatory frameworks remain unclear. Meaningful regulation is complex and must keep pace with the rapid developments in AI, yet geopolitical tensions make uniform global rules unlikely. It is also uncertain whether governance will be led by business, government, or society. The EU AI Act provides an initial European framework, but questions remain whether it might slow Europe’s ability to keep up with AI innovation compared to regions with lower levels of regulation.

Emerging technologies, especially AI, will unleash disruptive potential over the next ten years, with significant consequences for users. While technical possibilities can be predicted with relative certainty, how consumers and business will respond is far less certain. Acceptance may vary widely across demographics and cultures—Northern Europe tends to be more open to technology, while scepticism is stronger in Southern and Eastern Europe. Responses could range from enthusiastic adoption to active resistance.

A "post-privacy" world, where personal data is openly accessible and privacy no longer exists, could emerge within ten years due to increased data use and AI. However, ethical concerns, public resistance, and regulation (building on GDPR’s legacy) may prevent this. Europe’s strong privacy stance may shape a unique path, with implications for its AI leadership.

The future freedom of digital platforms in Europe is uncertain. EU regulations like the Digital Markets Act and Digital Services Act could serve as a blueprint for other countries, but the US remains cautious about national regulation and views EU rules as potentially disadvantaging American firms. This dynamic creates unpredictability and potential geopolitical tensions⁴.

Venture capital is vital for Europe’s digital innovation, yet investment levels have stagnated or declined in recent years⁵. Key factors include government programmes that mobilise private capital and reduce investor risk, as well as corporate venture capital enabling targeted, strategic investments in start-ups. Whether Europe can create a financing environment that boosts start-up rates and ensures competitiveness remains to be seen. Initiatives like the European Savings and Investments Union (SIU) and the European Tech Champions Initiative (ETCI) could improve the situation, but overcoming fragmented national financial markets is crucial.

Within the next decade, AI will be deeply embedded across all sectors throughout Europe. Beyond automating routine tasks, specialised AI will assist professionals such as helping doctors detect and treat diseases early. For consumers, AI will enable hyper-personalised experiences, including bespoke product design, immersive shopping and predictive health interventions through wearables.

As digitalisation and connectivity expand, risks of cyberattacks and data misuse will rise sharply, amplified by AI’s growing data demands. Continuous enhancement of security measures will be vital, making cybersecurity laws and data protection regulations increasingly important.

In ten years, companies will increasingly design products and processes around digital channels and technologies. Digital-first models will dominate, delivering greater efficiency, reach, and flexibility. Apps and online platforms will be standard customer touchpoints, with AI enabling tailored, individualised services.

Europe has successfully transformed its strength as a continent of hidden champions (small and medium-sized enterprises that excel in their niche yet remain largely unknown publicly) into being a global leader in technology. European experts celebrate success in global B2B digital markets with highly specialised solutions, operating on par with leading global tech trendsetters. The new formula for success, ‘European digital excellence’, combines traditional expertise with digital innovation. European corporations and medium-sized companies are setting global standards with their own platforms. Europe is defining benchmarks for Industry 5.0 – humans working alongside advanced technologies and robotics - and shaping global digital markets. The European single market acts as a powerful launchpad for companies scaling globally.

The European tech sector has nearly doubled in size within ten years, generating annual revenues over €3 trillion⁶, with more than half based on the export of digital services. Several former niche players have grown into billion-euro global platform providers. Based on the formula ’domain knowledge + digitalisation = global market leadership’, European companies are shaping the global market for industrial digital solutions.

The transformation of the labour market is achieved through ‘dual digitalisation’, supported by a strong European education system with various strengths (dual training in Germany, Austria and Switzerland; technical universities in France; practical training in the Netherlands). Ten million people work in the European technology and digital economy. New hybrid qualifications such as ‘digital mechanical engineer’ or ‘AI chemist’ emerge. EU-wide recognised digital certifications and micro-credentials enable lifelong learning and professional mobility.

The digital regulatory framework is pragmatic, promoting innovation while ensuring quality. The European Trust Label is internationally recognised as a guarantee of quality. European testing institutes certify AI systems. Politicians act as enablers, fast-tracking approvals for digital projects, creating a comprehensive and pragmatic regulatory framework for innovation, and investing heavily in digital education. The EU digital strategy harmonises national approaches without weakening regional strengths.

Europe becomes a preferred innovation hub for international tech giants, hosting numerous innovation and R&D centres. While Europe helps shape digitalisation, it is not in the driver's seat and remains dependent on decisions made elsewhere. Corporations from North America and Asia operate many R&D centres on the continent, where European engineers uniquely combine precision with innovation. European companies are sought-after development partners for digital industrial solutions.

The European technology industry has grown by over 60 per cent in ten years to €2.4 trillion, driven by massive foreign investments. European companies benefit as co-innovators and premium implementers. A new model emerges: "Developed in Europe, owned by Silicon Valley and Shenzhen". Start-ups are globally oriented, often acquired by major players, while SMEs supply innovation to global platforms.

Around 7 million people work for international tech firms – half directly and half through partners and suppliers. Salaries are high, especially in global technology hubs like Munich, Paris, Amsterdam, Berlin, Stockholm and Barcelona. Europe is benefiting from a ‘brain gain’ as international talent arrives for tech jobs. European universities evolve into practically oriented talent factories, producing graduates in high demand worldwide. Cooperation between tech giants and European educational institutions fosters the development of young talent.

Europe positions itself as extremely innovation-friendly, fast-tracking tech talent to obtain visas (EU Blue Card 2.0), offering flexible working time rules, and providing tax breaks for R&D. The strategy towards non-European tech giants emphasises cooperation over confrontation. Data protection is approached pragmatically, with users consciously accepting data use in exchange for improved services.

Europe has developed its own continental tech champions producing excellent, but highly specialised and complex solutions that struggle to scale globally. Strict data protection and high technical standards turn European idealism into a curse. Political ambitions for digital sovereignty lead to strict ‘Buy European Digital’ policies. As a result, European alternatives such as EuroCloud and EuroGPT dominate the internal market, innovative and powerful but internationally isolated and not scalable.

Annual revenues stagnate just above €1.5 trillion. The industry remains a technological leader but lacks global reach. Automation and efficiency maximise productivity across sectors, yet the labour market suffers job losses due to inadequate adaption to new technologies. European digital champions are profitable but small while exports decline due to incompatible standards. A two-speed economy emerges: prosperous high-tech islands contrast with shrinking traditional industries.

Comprehensive digitalisation and disruptive technologies deepen societal and labour market divides. A wealthy, highly qualified digital elite contrasts with a significantly larger underemployed population. Training and retraining programmes fail to meet digital market demands. Regional disparities widen: tech centres such as Paris, Munich, Stockholm and Amsterdam thrive, while other regions including southern Italy, rural Eastern Europe, and structurally weak regions in Western Europe are being left behind. Social mobility is stagnating, with limited opportunities for those outside the digital elite. Political tensions between ‘digital’ and ‘analogue’ are shaping elections, and Eurosceptic movements are gaining support as they criticise the ‘Brussels digital dictatorship’.

Technology protectionism dominates policy. Digital sovereignty becomes an end in itself. Strict regulation protects European providers but prevents scalability, flexibility and innovation. Massive subsidies for European tech companies burden national budgets. Tensions rise within the EU between member states that are prioritising digital sovereignty and those that are more open.

Europe becomes a digital laggard, fully dependent on foreign platforms and technologies. International tech companies see Europe purely as a sales market, avoiding local investment and partnerships. European companies rely entirely on foreign cloud services and AI systems, with even critical infrastructures running on imported technology and systems. There is no technology transfer, as Europe only buys ready-made solutions, losing direct customer access to foreign platforms.

The European tech industry shrinks to €750 billion in annual revenue, half its size a decade earlier, while €800 billion flows abroad annually in licences and platform fees. The European IT industry has practically collapsed with traditional companies facing insolvency. Europe is becoming a low-wage digital region: simple online services are handled locally, while innovation occurs elsewhere. Massive digital imports deepen the trade deficit.
The labour market suffers massive structural underemployment. Highly qualified digital specialists work for low wages as offshore developers. Platform work at minimum rates replaces jobs with social security. The middle class is rapidly eroding. Young people face bleak career prospects, leading to brain drain to the US and Asia. Social security systems collapse under the strain.

Politicians have capitulated to global platforms. Weak regulatory efforts are being ignored or circumvented by global tech giants. Europe is becoming a ’supplicant’ with officials traveling to Silicon Valley and Shenzhen to negotiate better terms. Digital colonialism has become a reality. Algorithms shape European destinies with democratic oversight. The EU is divided and ineffective, with fragmented national efforts worsening the situation.

European SMEs and their hidden champions offer highly specialised products and services and often lead globally. This expertise must be systematically transferred to the digital world. To succeed in Industry 5.0, Europe must focus on SMEs’ strengths: short decision-making processes, customer proximity, flexibility and innovation. Cross-border cooperation and using the internal market as a springboard for global expansion are essential.

Europe must balance digital sovereignty with global partnerships by developing new resilience strategies without calling old partnerships into question. Multi-cloud or hybrid cloud solutions, for example, reduce dependencies by incorporating European providers and on premises (‘on prem’) computing. Enhanced data encryption is increasingly important. The motto must be: ‘Independence without digital protectionism’. Initiatives such as Gaia-X should be consistently developed and provided with sufficient resources.

AI is here to stay. To compete globally, European companies must integrate AI sustainably into existing business processes and tailor solutions, whether automating processes or augmenting employees. European tech providers can capitalise on AI breakthrough by positioning themselves as reliable partners with resilient offerings and local cloud services. Developing globally competitive AI and data architecture solutions and systematically expanding Europe’s specialised industrial AI strength is vital.

Regulation must not become a short-term political bargaining chip. Despite (geo)political pressure, decision-makers must consider long-term digital framework implications and reduce bureaucracy promptly. The EU should improve coordination between national and European regulations and consistently apply the ‘digital by default’ principle in administration.

Start-ups and innovative tech companies are the growth engines of Europe’s digital economy. This makes it all the more important to create the right environment for them to grow into Europe’s own tech giants. Strengthening financing through public funds (EIC, InvestEU, national programmes) and improving tax, legal, and financial conditions for private capital access are crucial. Simplifying employee participation schemes and easing visa and naturalisation processes will attract top international talent. Completing the Savings and Investments Union is essential to retain European capital in the tech sector.

Digital skills are key to Europe’s competitiveness. Aligning education and research with industry needs through practical training supports the social transformation driven by AI and new technologies. Expanding EU-wide recognised qualifications, Erasmus+ programmes for professionals, and the European Universities Initiative will strengthen this foundation.

The EU’s coordination capabilities surpass those of individual member states. These should be used consistently through:

• Joint procurement of cloud infrastructure and AI computing capacity
• Coordinated investment in key technologies like semiconductors and quantum computing
• Harmonisation of standards to ensure global scalability of European solutions
• Pooling research resources in European centres of excellence