Investment in ICT and Productivity Growth Can Add euro 760 Billion to European Economy by 2020

LONDON, Sept. 21, 2011 /PRNewswire/ -- New research, commissioned by AT&T* and conducted by leading independent research company Oxford Economics, finds that if Europe increases its investment in Information & Communication Technology (ICT) to match levels elsewhere in the world, it could reap hundreds of billions of Euros of additional GDP thanks to faster productivity growth.

ICT investment and productivity growth are closely linked, and European countries are lagging other parts of the world in both. The research shows European GDP could grow by an additional euro 760 billion, or an extra 5 per cent above forecasts, if Europe matched total US ICT levels by 2020. This would be worth around euro 1,500 per person at today's prices. ICT driven innovation would contribute approximately one third of that growth – 1.5 per cent of GDP or around euro 220 billion.

For some countries currently experiencing sluggish growth—for example, Spain and Italy—the impact on GDP could be over 7 per cent, or euro 100 and euro 140 billion, respectively, at today's prices.

"Productivity is the cornerstone of economic growth. There is clear evidence that investing in technology can make European companies more productive and competitive, which is critical to growth in these tough financial times. This report helps us understand how technology drives productivity, and how to maximise returns from ICT investments," said Andrew Edison, Regional Vice President for EMEA, AT&T.

The key findings of the report are:

• As a percentage of GDP, Europe's stock of ICT capital has fallen to around two-thirds of the level in the US, the world leader, having been close to parity in 1991.
• This ICT investment gap has affected Europe's productivity growth significantly, which has averaged only half the US rate since 2000.
• Investment in ICT generates a bigger return to productivity growth than most other forms of capital investment. This so-called "ICT Dividend" is estimated to contribute around one-third of the overall 20 per cent to 25 per cent returns on ICT investment.

The research highlights how some individual countries have been impacted by this trend:

• The European productivity leaders are Scandinavia and the UK. Over the past 15 years, they have seen average labour productivity growth of between 1.7 per cent and 2 per cent a year.
• Italy and Spain have made least effective use in Europe of ICT to drive productivity.  Since 1995, their annual labour productivity has averaged only 0.3 per cent and 0.8 per cent, respectively.

The report also has some clear messages for governments and policy makers. Oxford Economics has concluded that government policy directly influences the effectiveness of ICT investment and its productivity benefits.

European governments would enable considerable growth by putting more effective ICT policy at the heart of their economic agendas. It would also help Europe stay ahead of emerging markets that are adopting technology quickly. Key measures that would improve productivity include harmonising data protection laws across the EU, reviewing regulations around data sharing and keeping policies up to date with technological developments.

"Our research shows that firms in Europe stand to benefit significantly from increased investment in ICT," said Adrian Cooper, CEO, Oxford Economics. "However, they must also consider the critical intangible assets—such as employee know-how and organizational improvements—that will allow them to wring the most value from their investments. Governments, meanwhile, must keep regulations up to date with advancements in technology to ensure maximum benefit across the EU."

"There is a dire need for Europe to improve its productivity, and investment in ICT is the trump card to achieving this," said Fabio Colasanti, President of the International Institute of Communications and Senior Adviser at the European Policy Centre. "But national governments must prioritise ICT investment more effectively and focus on creating the right conditions for investment. This means, improvements to ICT infrastructure, more flexible labour markets and better ICT education. These reforms will deliver significant productivity returns and boost European growth in the long term. There are also wider and equally important social benefits of investing in ICT including better access to education, more effective health care and improvements to transport security. Policymakers should take notice and do all they can to ensure the digital agenda in Europe is given the push it needs."

The full report and supporting information is available at:

www.corp.att.com/bemoreproductive

To join the discussion about ICT and productivity click here, or search for 'Be More Productive' on www.linkedin.com.

Note to editors

Definition of the "ICT Dividend"

Investment in ICT enables the economy to be more productive and to generate a higher level of GDP.  This extra GDP will be generated over a number of years as that ICT capital is operated.

As part of Oxford Economics' return on investment (ROI) analysis, they measured the extent to which ICT investment raises GDP over-and-above the value of the capital investment. The amount was expressed as an annual real rate of return on that investment.

Our research shows that investment in ICT generates a bigger return to productivity growth than most other forms of capital investment. While the returns on other forms of capital investment are about 15 per cent on average, Oxford Economics estimates the ROI on ICT investments to be typically between 20-25 per cent.

The "ICT Dividend" is estimated to contribute one-third of the overall returns on ICT investment, or about 7-8 percentage points. So, according to Oxford's analysis, investing in ICT rather than other capital investments may boost ROI by as much as 50 per cent.

Methodology

The report is designed to provide data and analysis to decision makers within companies and governments when making investment decisions related to ICT.

Detailed explanations of the data and analysis methods used in this report, together with detailed Q&As with interview participants, are included in the annexes and are available in full online at www.corp.att.com/bemoreproductive.

*AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

About AT&T

AT&T Inc. (NYSE: T) is a premier communications holding company and one of the most honored companies in the world. Its subsidiaries and affiliates – AT&T operating companies – are the providers of AT&T services in the United States and around the world. With a powerful array of network resources that includes the nation's fastest mobile broadband network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet, voice and cloud-based services. A leader in mobile broadband and emerging 4G capabilities, AT&T also offers the best wireless coverage worldwide of any U.S. carrier, offering the most wireless phones that work in the most countries.  It also offers advanced TV services under the AT&T U-verse® and AT&T | DIRECTV brands. The company's suite of IP-based business communications services is one of the most advanced in the world. In domestic markets, AT&T Advertising Solutions and AT&T Interactive are known for their leadership in local search and advertising.

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About Oxford Economics

Oxford Economics was founded in 1981 as a commercial venture with Oxford University to provide economic advice, forecasts and analytical tools to international organizations. Since then, Oxford Economics has become one of the world's foremost independent international forecasting consultancies, producing projections, analysis and data on 190 countries, 85 industrial sectors and over 2,500 cities and sub-regions.

SOURCE AT&T Inc.