Europe is failing to capture the economic upside of the global AI surge, even as the technology drives a noticeable boost to U.S. growth, Capital Economics said in a Tuesday note.
Europe is failing to capture the economic upside of the global AI surge, even as the technology drives a noticeable boost to U.S. growth, Capital Economics said in a Tuesday note.
While AI-linked investment in computer hardware and software has helped offset headwinds in the U.S., the macroeconomic research firm notes that “there has been no boom in AI investment in Europe.”
Imports of computers and related components into the eurozone have remained flat since late 2022, in stark contrast to the more than two-fold increase recorded in the U.S. over the same period. At the same time, the eurozone manufacturing of those goods has fallen by about 35%.
The investment gap is further underscored by capital expenditure trends. Eurozone spending on machinery and equipment has barely grown over the past three years, compared with around 15% growth in the U.S., according to Capital Economics.
The U.K. has shown a similar pattern of stagnation. This underperformance is in line with the firm’s AI innovation index, which gives eurozone countries relatively low scores for their likelihood of leading AI development.
Even before the recent surge in American AI spending, Capital Economics points out that the U.S. was far ahead in private investment. In 2024, private AI investment in the U.S. was estimated at over €90bn, equal to about 0.4% of GDP.
By comparison, the EU’s InvestAI and AI Champion Initiatives together aim to mobilise €40bn a year — just 0.2% of GDP — and those commitments remain largely aspirational.
China, meanwhile, could allocate up to €120bn of fiscal funding to AI projects in a matter of months, equivalent to around 0.7% of GDP.
There are signs of adoption rather than development. The share of European companies using AI rose from 8% in 2023 to 13.5% in 2024, suggesting businesses are starting to integrate new tools even without matching U.S.-style capital spending.
However, Capital Economics notes that “usage is significantly behind that in the U.S.,” where between 20% and 40% of firms are believed to be using AI tools.
Data from Anthropic’s usage index shows European engagement at roughly one-third below U.S. levels, adjusted for population.
The firm cautions that experimentation with AI does not automatically translate into productivity gains, particularly given Europe’s more rigid product and labour markets. As a result, it expects AI-related gains in productivity to be “smaller and slower” in Europe than in the U.S.
It forecasts economic growth of around 2.5% in the U.S. in 2026 and 2027, compared with just 1.3% in the U.K. and 1.0% in the eurozone, with weaker AI investment and slower adoption cited as key factors behind the widening growth gap.