Europe in the Intelligent Age 2025

Corporate investment in research and development (R&D) and capital formation by large European firms used to be broadly on par with US firms, but in 2022 trailed by €700 billion, with the gap continuing to widen (Figure 1). The difference is starkest in technology, accounting for €450 billion of the disparity. Filling this gap is fundamental to building a private sector that can scale to become world-leading.Introduction: From broad diagnostics to focused action Europe is at a turning point – and will need to act now to close a €700 billion investment gap, regain competitiveness and capture €2-4 trillion of value at stake. Growing corporate investment gap, notably in technology FIGURE 1 Europe872 United States1,186+36%2015 Europe738 United States853+16%2010 Europe913 109 179 625 United States1,609 560 276 773+76% /uni0394=451 20222010-2022 capital expenditure and R&D spend of European¹ and US corporates² with revenue > $1 billion, €1 billion in 2022 prices³ 4.4% 4.8% 4.5% 5.7% 4.6% 6.7% % of GDP Technology Energy Other 1. EU27 + United Kingdom, Switzerland and Norway (EU30) 2. Only considering public companies, excluding intangible assets 3. Historical spending for both EU30 and US has been adjusted for inflation; for US, spending was converted from euros (EUR) to US dollars (USD) using the foreign exchange rate for each individual year, then deflating for each year with USD inflation rates, and finally converting the deflated US spending figures back to EUR based on 2022 foreign exchange rates. Source: McKinsey Value Intelligence Platform, S&P Global Market Intelligence, World Bank, AMECO Europe in the Intelligent Age: From Ideas to Action 6