Digital Skills, SMEs, and 5G Networks Lag Behind in the EU

Digital Skills, SMEs, and 5G Networks Lag Behind in the EU

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During the Covid pandemic, EU member states have been advancing in their digitalization efforts but still struggle to close the gaps in digital skills, the digital transformation of SMEs, and the roll-out of advanced 5G networks. The 2022 Digital Economy and Society Index (DESI), unveiled this week, says that the Recovery and Resilience Facility, with about €127 billion dedicated to reforms and investments in the area of digital, offers an unprecedented opportunity to accelerate the digital transformation, which the EU and its Member States cannot afford to miss.

The findings show that while most of the Member States are making progress in their digital transformation, the adoption of key digital technologies by businesses, such as AI and Big Data remains low. Efforts need to be stepped up to ensure the full deployment of connectivity infrastructure (notably 5G) that is required for highly innovative services and applications. Digital skills are another important area where the member states need to make bigger progress.

Finland, Denmark, the Netherlands, and Sweden remain the EU frontrunners. However, even they are faced with gaps in key areas: the uptake of advanced digital technologies such as AI and Big Data remains below 30% and very far from the 2030 Digital Decade target of 75%; the widespread skill shortages, which are slowing down overall progress and lead to digital exclusion. There is an overall positive convergence trend: the EU continues to improve its level of digitalization, and member states that started from lower levels are gradually catching up, by growing at a faster rate. In particular, Italy, Poland, and Greece substantially improved their DESI scores over the past five years, implementing sustained investments with a reinforced political focus on digital, also supported by European funding.

As digital tools become an integral part of everyday life and participation in society, people without appropriate digital skills risk being left behind. Only 54% of Europeans aged between 16 -74 have at least basic digital skills. The target of the Digital Decade is at least 80% by 2030. In addition, although 500.000 ICT specialists entered the labor market between 2020 and 2021, the EU's 9 million ICT specialists fall far short of the EU target of 20 million specialists by 2030 and are not enough to bridge the skills shortages businesses currently face. In 2020, more than half of the EU enterprises (55%) reported difficulties in filling ICT specialist vacancies. These shortages represent a significant obstacle to the recovery and competitiveness of EU enterprises. The lack of specialized skills is also holding the EU back in its efforts to achieve the Green Deal targets. Massive efforts are therefore required for the reskilling and upskilling of the workforce.

Regarding the uptake of key technologies, during the Covid pandemic, businesses have pushed the use of digital solutions. However, AI and Big Data used by businesses stand only at 8% and 14% respectively (target 75% by 2030). These key technologies bring huge potential for significant innovation and efficiency gains, particularly among SMEs. For their part, only 55% of EU SMEs have at least a basic level of digitalization (target: at least 90% by 2030), indicating that almost half of SMEs are not availing of the opportunities created by digital.

In 2021, Gigabit connectivity increased further in Europe. The coverage of networks connecting buildings with fiber reached 50% of households, driving overall fixed very high capacity network coverage up to 70% (100% target by 2030). 5G coverage also went up last year to 66% of populated areas in the EU. Nonetheless, spectrum assignment, an important precondition for the commercial launch of 5G, is still not complete: only 56% of the total 5G harmonized spectrum has been assigned, in the vast majority of Member States (Estonia and Poland are the exceptions).

The online provision of key public services is widespread in most of the EU Member States. Ahead of the introduction of a European Digital Identity and Wallet, 25 Member States have at least one eID scheme in place, but only 18 of them have one or more eID schemes notified under the eIDAS Regulation, which is a key enabler for secure digital cross-border transactions.

The EU has put on the table significant resources to support the digital transformation. €127 billion are dedicated to digital-related reforms and investments in the 25 national Recovery and Resilience Plans that have so far been approved by the Council. This is an opportunity to accelerate digitalization, increase the Union's resilience and reduce external dependencies with both reforms and investments. Member states dedicated on average 26% of their Recovery and Resilience Facility (RRF) allocation to the digital transformation, above the compulsory 20% threshold. States that chose to invest more than 30% of their RRF allocation to digital are Austria, Germany, Luxembourg, Ireland, and Lithuania.

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