How European tech spend will bounce back In 2024

Last year was an undeniably challenging one for the European tech market, with the grinding war in Ukraine, high inflation and energy prices, lingering supply chain constraints and an uncertain job market. As such, Forrester forecasts that European tech spend will have grown by only 2.6 per cent in 2023.

 

However, the recovery of real incomes, easing inflation, lower energy prices, abating supply constraints, improved business confidence and a stronger job market contribute to an improved economic outlook in 2024. Forrester therefore expects European tech spend to bounce back to grow by 5.1 per cent in 2024.

 

Software growth

 

In 2024, tech spend will largely be driven by software growth. Over the next year, enterprise and government software spend in Europe will grow by over 10 per cent, capturing more than half of tech spend growth in the region. Specifically, investment in off-the-shelf AI software in Germany, France, Italy, Spain and the UK will see spend increase by an annual rate of 21 per cent between 2023 and 2030.

 

Investment in software drives higher-value creation activities, as countries with higher-value economic activities in finance, professional services and information and communication services spend more of their gross fixed capital formation on intellectual property products (including software).

 

IT service growth will also be robust in 2024 compared to 2023’s gradual slowdown as enterprise digital maturity, cyber-security, and digital innovation drive spend. Finally, computer service exports to the European Union – especially from the US, the UK and India – will further drive IT service growth.

 

EU rights, regulations and fair market competition

 

Tech market growth will also be fuelled by regulations and fair market competition in Europe. At the continental level, the European Commission’s AI Act will place obligations on human oversight, safety, privacy, transparency, nondiscrimination and social and environmental wellbeing. Similarly, the EU’s Data Act prevents enterprise vendor lock-in from cloud data-processing services on connected devices. The European Commission is also finalising data centre sustainability and energy efficiency regulations.

 

At a country level, it’s likely the UK communications services regulator Ofcom will regulate hyperscaler cloud market dominance to help enterprises switch cloud providers or use multiple ones. In Germany, the competition watchdog Bundeskartellamt is considering investigating Microsoft for possible anticompetitive practices within the country’s digital ecosystem, including whether it unfairly restricts cloud adoption choice.

 

Innovative high-value activities and digital maturity

 

The tech market outlook for 2024 will also be impacted by higher value business activities and enterprises with higher digital maturity. More than a quarter of the Irish and Swiss economies, for example, are dedicated to high-value activities, and more than a third of their gross fixed capital formation is spent on intellectual property products.

 

With regards to digital maturity, workplace ICT specialist concentration is higher for enterprises with high or very high digital intensity and these enterprises are more likely to spend more on technology. In Europe, Sweden, Finland and the Netherlands have the highest share of ICT specialists in the workforce; Helsinki, Stockholm and Amsterdam are also in the top five cities in Europe for tech talent availability. Digital firms tend to be more productive and more resilient to economic shocks and trade disruptions, and are more likely to engage in international trade. The growing push for digital maturity is evident in the fact that, in 2023, the European Union allocated €400 million to the Digital Europe work program, that will increase by 30 per cent in 2024.

 

Ultimately, as the European economy begins to stabilize in 2024 and beyond, we expect to see a much stronger tech market which will grow more than double its growth in 2023.

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You can also read about Forrester’s Global Tech Market Forecast here.