Europe is a continent of many nations, natural languages and currencies. Uniting it is an on-going project begun after the second world war to create stability and prevent it from being the origin of future global conflict. The EC and latterly the EU corralled countries together in a common trading block. The fall of communism led to an extension eastwards with large countries such as Poland, the Czech Republic, Romania, Poland and Bulgaria joining, giving millions of people the chance to share in the economic benefits. However most have failed to recover significantly from the economic crisis of the Credit Crunch 10 years ago, while some of these countries are uneasy with the idea of a federal European state and/or the social pressures cause by the freedom of movement of millions of citizens from poorer eastern countries to richer western ones. Brexit is the biggest challenge to European unity since its creation, but it won’t be the last. There are many other countries in which this kind of new nationalism is taking hold, even if few have the UK’s lax, unwritten constitution and ambitious senior politicians prepared to play with issues of sovereignty.
Although it is becoming increasingly fragmented, Europe is a relatively rich region with a long and significant investment in IT and communications. In the year to the end of March total ITC spending grew by 0.8% to €1.5 trillion ($1.8 trillion). The 3 major countries (Germany, the UK and France) accounted for 56% of spending – a much higher proportion than the 29% (with Russia) or 36% (without) proportions their populations are of the region.
I’ve given the ITC market sizing of each country (in local currency), its growth in the year to Q1 2018 v Q1 2017 and the proportion this spending is of the European total in my Figure. It shows that there are big differences in spending between south and north as much as well as between east and west – both Belgium and Holland for instance are bigger ITC markets than Spain, despite the latter’s population being one and a half times bigger than both together. Greater economic success in east and south would create strong growth in ITC spending, but it doesn’t look likely any time soon.
Political and social fragmentation prevent major European suppliers from succeeding on the world stage, where American ones lead in terms of innovation and patent ownership and Chinese ones – in terms of manufacturing. In future, automation will reduce the current advantages of labour price arbitrage, allowing more manufacturing and IT services to be done in Europe; but there are very few potential regional champions today and the development of new ones will be curtailed by new nationalism and increasing fragmentation.