The digital economy is gradually becoming essential to the fabric of everyday life.

Information and communications technology affect people’s private and professional lives in a myriad of ways. Whether it’s using advanced digital tech at work or using the internet to order goods or stream TV,  the degree to which ICT and digital services have penetrated society varies in different regions of the world.

In Europe, the digital economy is flourishing, and with both the EU and the EC focusing on carefully tending this new economy, it is expected to become even more valuable in the coming decade.

The Digital Economy in European Society

• Between 2007 and 2016, internet penetration increased from around 55% of European citizens to 85%.
• In 2016, 82% of people used the internet.
• Highest rate of usage was in Denmark, Luxembourg, the Netherlands, Finland, Sweden, and Germany, at over 90% of people.
• Internet usage is much lower in Portugal (70%), Greece (69%), Italy (69%), Romania (60%) and Bulgaria (59%).
• Within the EU, The Netherlands and Luxembourg have the highest rate of citizens with home internet access, with both at 97%.
• Broadband is the most common form of internet available in the EU, with 83% of people using this form of internet connection.
• More than two-thirds of Europeans access the internet on a daily basis.

By 2019, the European digital economy will be worth over 1 billion euros.

High-speed broadband internet that’s both easily accessible and affordable for most people is now one of the most important ways to promote and develop a society that’s well-informed and knowledge-based. In Europe, overall internet penetration is high, but there are stark differences in internet accessibility between various countries.

There is also something of a gap in internet access between people in urban versus rural locations. While 88% of people in urban areas, and 86% in suburban areas and towns, have internet access, that figure drops to 80% for people living in rural areas. And the gap between city and rural access is particularly wide in those countries where internet access is lower to begin with—including Greece, Portugal, and Romania.

Also of note is that those countries that record the highest level of overall internet use also record the highest levels of mobile internet access, and mobile device use. And correspondingly, those countries where internet access is lowest demonstrate the lowest rates of mobile internet access.

These differences clearly demonstrate that while some countries are adapting to the digital economy in leaps and bounds, for others the process is much slower. In order to develop a fully-functional digital economy, it’s important to recognise these differences, and develop strategies for ensuring that people in rural locations can enjoy the same level of access as those in cities and suburban towns.

The digital single market

While digital technology is having an unprecedented effect on the world, and the economy, there still exist online barriers that prevent citizens of certain countries from accessing everything the internet has to offer. The existence of over two dozen different national digital markets across the European Union means that it’s harder for citizens, governments, and businesses to fully benefit from digital services, tools, and products.

The proposed solution is to combine these disparate digital economies into one single digital economy. According to the EC this could contribute up to 415 billion euros to the European digital economy, as well as hundreds of thousands of jobs.

The development of the digital single market has three primary objectives:

• To boost competitive growth;
• To transform Europe’s industrial sector;
• To create new products and services for the expanding digital market.

Amsterdam as the heart of the digital economy

Amsterdam is a city that has always led the way in terms of international commerce, so it’s no surprise that it’s doing so yet again in Europe’s new digital economy. For a variety of reasons, the capital of The Netherlands has become a hotspot for IT experts, CTOs, and a wide range of digital enterprises involved in the European market.

The city boasts excellent digital infrastructure, with fibre-optic networks and undersea cables connecting major cities worldwide. It’s also home to the Amsterdam Internet Exchange, which is one of the world’s biggest internet exchanges.

• Amsterdam has managed to attract global digital media companies such as Netflix, Facebook, and Salesforce, all of which have European headquarters in the city. And overall, more than 170 ICT companies are headquartered here.
• A skilled workforce makes the city an even more attractive prospect, especially given that a lack of digitally-skilled workers is one of the biggest limitations of the digital economy.
• The Netherlands is a migrant-friendly country, with a Highly Skilled Migrant Visa program that makes it relatively easy for skilled tech workers to live and work in the country.

What Challenges Does Europe’s Digital Economy Face?

The digital economy is well on the way to being an integral part of Europe’s present and future economic stability and success—but there are challenges to face, and problems to solve along the way.

The most pressing issue is one that is already making itself felt in the UK and other parts of the world: a shortage of skilled labour that will, if not addressed, have the potential to significantly slow down the rate at which new technologies can be harnessed by companies in all industries.

According to the European Commission, by 2020 around half a million job vacancieswill exist as a result of a lack of trained people to fill those roles. In order to get a head start on solving this problem, the EC will launch a continent-wide STEM coalition that will lay the foundation for improving education in these subject areas—science, tech, engineering, and mathematics. The coalition will involve national authorities, education institutions, and stakeholders in order to ensure all perspectives are covered.

Another potential issue is that of tax law, and whether it should be reformed in view of the increasing relevance of the digital economy. Those who support tax reform argue that digital companies such as Facebook and Amazon are profiting unfairly from tax law that allows them to minimise the amount of tax they pay on their European operations. On the other side of the argument, some European governments say that tax reform may lead to double taxation for digital companies, and higher charges for digital goods and services. It seems unlikely that a consensus will be reached on this issue easily—but the EC is calling for this issue to be resolved sooner rather than later.