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Since last year’s Draghi report, Europe’s economic policy debate has largely focused on one central trade-off: boosting competitiveness and enhancing “tech sovereignty”. To boost its declining economic competitiveness, Europe needs to close its widening innovation gap with other regions such as the US and China, which not only requires developing new technologies such as AI, but ensuring that they are rapidly and widely adopted.
At the same time, Europe’s perceived over-dependence on international technology providers and supply chains is increasingly being discussed as a strategic risk that needs to be addressed through a tech sovereignty agenda that could, at least in part, result in limiting international technology flows to and from Europe.
This challenge sits at the heart of a new Flint report, sponsored by Amazon, examining the economic contribution of technology diffusion in the EU. It shows that global technology diffusion – the process by which innovations spread through firms and across sectors – is a critical source of economic growth for Europe, with interdependence delivering substantial mutual benefits for both Europe and its partners.
Europe’s challenge, therefore, is not to decide whether it should be open to technology flows or technologically sovereign, but how it can be both – ensuring that innovation and its diffusion are encouraged, both in the EU and through international technology flows.
Our report on The economic contribution of tech diffusion in the EU quantifies the benefits of Europe’s participation in global technology markets, focusing on the adoption of US-origin technologies. The results are striking. In 2025, the activities of US technology firms operating in Europe, along with their supply chains, contribute around €1.0 trillion to EU GDP – equivalent to 5.4% of total output. Adding the contribution of intangible assets like software, data, and organisational know-how, this rises to €1.1 trillion (5.9% of GDP).
These gains are not static; they grow over time as the productivity gains compound. Spillovers from technologies developed elsewhere allow European firms to adapt and innovate, by reorganising production, scaling more efficiently and improving the use of intangible capital.
Continued access to frontier technologies, particularly in fast-moving areas such as AI, could deliver an additional permanent uplift of around 0.25% in GDP – equivalent to €46 billion in 2025 and €66 billion by 2030.
Looking ahead, if current levels of openness and diffusion continue, the total contribution of US technology to the EU economy is expected to reach €1.3 trillion by 2030. Indeed, under only slightly more optimistic scenarios, it could be as high as €1.5 trillion.
Far from being a passive user, the EU is one of the world’s largest exporters of digital and ICT services, recording a consistent trade surplus in digitally delivered services. European firms such as SAP, Siemens and Ericsson demonstrate that international collaboration and interdependence can reinforce, not undermine, Europe’s technological strength.
Nevertheless, the Draghi report and the Commission’s State of the Digital Decade 2025 underline that openness alone is not enough. To close its innovation gap, whether by accelerating the development of new technologies or the diffusion of innovation across the economy, the EU must invest in skills, R&D, and complementary institutions that enable firms and workers to make full use of available technologies. Without them, diffusion slows and the benefits of innovation risk becoming uneven.
The evidence suggests that the cost of scaling back technology diffusion would be substantial. Even a modest 15% reduction in the benefits Europe accrues from international technologies could reduce EU GDP by around €200 billion annually by 2030, close to 1% of total output. And, given long lead times and significant costs associated with substituting overseas technology for home-grown alternatives, this would be a persistent loss – not a temporary dip – placing the EU economy on a lower growth trajectory for years to come.
Europe’s challenge is not just to innovate more, but also to adopt and diffuse innovations faster. The evidence from this report suggests that openness to global technology and digital adoption by European firms are mutually reinforcing. Openness drives access to technology that generates EU-based innovation, ensuring that global technology flows translate into European prosperity.
The right policy mix will need to do three things:
These principles point to a balanced path forward – one that recognises and builds on the interdependence, rather than the trade-off, between competitiveness and sovereignty. As the EU refines its digital strategy, its goal should be to sustain Europe’s role as a global technology leader – shaping, not just participating in, the next wave of innovation – while remaining deeply integrated into global networks.
With the right policies and investments, Europe can turn global innovation into sustained European growth.
This blog was written by Surjinder Johal (Director) and Andy King (Specialist Partner).
Both authors joined Flint Global from the UK’s Office for Budget Responsibility (OBR), bringing deep expertise in economic analysis and public finances. Surjinder draws on his two decades of experience at the OBR and HMRC to advise clients through robust economic modelling and fiscal analysis. Andy leads Flint’s economic modelling and analysis, following a decade as a senior leader at the OBR, preceded by several senior roles within HM Treasury.
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