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On the 30th Anniversary of The European Single Market


18 Jan 2023


Global Europe
New Report Slams EU on Failure in Digital Innovation, AI, and Start-ups

Brussels, Belgium.  


A new report published today by MCC Brussels on the 30th anniversary of the founding of the Single Market details how the EU has strangled new technologies through over-regulation and has presided over a severe competitiveness decline. 




Despite the EU’s aspirations towards ‘digital sovereignty’, the report details how the EU has fallen behind on almost every measure of competitiveness in the new economy. Most worryingly, the EU de-facto policy of regulating but not creating new technologies threatens to turn Europe into a mere battleground for the US and China. 


The report’s author, Dr Norman Lewis – managing director Futures-Diagnosis Ltd and a worldwide expert on future trends and user behaviours regarding technology innovation and adoption – lays out the stark nature of the EU’s failures: 


  • Over half of the global private investment into AI goes to U.S. companies. 
  • Only 5 of the 100 most promising AI start-ups are based in Europe
  • In 2020, private funding for European AI start-ups stood at roughly $4bn compared to $36bn in the US and $25bn in China. 
  • Only 13 per cent of global VC investments go to Europe, with half to U.S. companies and one-third to Asia. 
  • The ‘Big 5’ tech giants spend R&D roughly equal to Germany’s total public and private R&D spending. 


The report calls for a total overhaul of EU policies towards start-ups, innovation and risk-taking. Among its recommendations are the following: 


  • Appoint a single commissioner in charge of innovation and start-ups, ending the confusing and counter-productive diffusion of responsibilities
  • Harmonise tax regimes to allow EU companies to offer equity to talent
  • Roll-back stifling regulations on AI
  • End the EU’s restrictive policies on pension & endowment investment into VCs


Dr Lewis commented: 


“ If the EU’s regulatory impulses continue to dominate its outlook, then the assertion of its digital sovereignty will only accelerate its geopolitical decline. The EU will not become a pioneer but remain a technology laggard. Referees do not win football matches. The future does not belong to the regulators of what exists. It belongs to the risk-takers who create it. The EU talks a lot about digital sovereignty. But in practice, it lacks technological sovereignty: a lead in creating new technologies. The ‘Brussels Effect’ – the EU’s ability to enforce rules and regulations – driven by its risk-averse precautionary culture lulls it into a false sense of security, believing that regulating digital outcomes is as vital as creating them in the first place. This also places too much emphasis on Brussels rather than encouraging member states to take the initiative. In technological innovation, particularly start-ups, the EU is seriously deficient.”


Professor Frank Furedi, MCC Executive Director, noted that: 


“The report highlights the EU’s institutional aversion to risk-taking – the fundamental precondition for innovation and economic growth. Across society, risk-taking is demonised. If Europe wishes to rise to the challenges of the new economy – in a world increasingly dominated by the US and China – it will need to rediscover the appetite for experimentation, exploration and innovation that defined its history.” 


The in-depth report on this anniversary of the Single Market argues that the EU’s record on start-ups should be a significant cause for concern. As the report notes, many start-ups rightly see EU regulation as causing friction with substantial administrative and compliance burdens on businesses. European start-ups are forced to seek money and the space to experiment outside the EU. Despite allocating €13.5 billion for start-up and scaleup support in its Horizon Europe budget for the next six years, the EU Commission doesn’t have a single official in charge of start-ups. But it has many laws constraining what can be created. 


In conclusion, the report calls for people across the EU to reclaim a spirit of risk-taking, innovation and a culture of experimentation to address this. The EU must avoid demonising technological progress and foster an atmosphere conducive to start-ups, innovation and experimentation.