Observations on European competitiveness & lessons for Northern Ireland's innovation landscape

Mario Draghi has produced a report for the EU on The Future of European Competitiveness. It's an excellent document of its type, low on impenetrable jargon or academic language, and with few distracting tables and graphs. The conclusions in this document are very stark and the report authors clearly don't want anyone to misunderstand the nature of the warning.

There's lots in here for anyone with an interest in innovation and technology development in Northern Ireland. There are a raft of lessons and issues raised that will be very familiar. Two areas caught my eye; a) productivity and b) clustering.

Department for the Economy NI Minister Conor Murphy and the PfG hammered home the importance of raising productivity levels here. And we're seeing the clustering locally that Draghi is calling for in his report.

What ills the EU (and Ireland) will likely be transmitted to Northern Ireland, so it's worthwhile considering the report's contents.

Up front in the foreword, the challenge is spelled out, describing the foundations of the EU's economic success are "now being shaken", and "an existential challenge" faces the EU due to "a lack of dynamism".

Technology provides a sizeable measure of the remedy to this, but consider: there is no EU company with a market cap over €100 billion that has been set up from scratch in the last fifty years; in the US, all six companies with a valuation above €1 trillion have been created in this period. From 2013 to 2023, the EU's share of global tech revenues dropped from 22% to 18%, while the US share rose from 30% to 38%.

I did say this was stark stuff. But what happens when an EU company finds success?

Well, it decamps to the US. Close to 30% of the unicorns founded in Europe – startups that went on to be valued over $1 billion – relocated their headquarters abroad, with the vast majority moving to the US. In hard numbers, 40 of 147 unicorns founded in Europe took flight overseas.

Structurally, the EU is not the most fertile ground. Regulations are stifling innovation and suffocating scale ups, the report says. The EU is "failing to translate innovation into commercialisation, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations".

More than half of SMEs in Europe flag regulatory obstacles and the administrative burden as their greatest challenge.

"We claim to favour innovation," the report says, "but we continue to add regulatory burdens onto European companies, which are especially costly for SMEs and self-defeating for those in the digital sectors."

Let's bring this back to Northern Ireland.

The report says researchers in Europe are less well integrated into innovation 'clusters' – networks of universities, start-ups, large companies and venture capitalists (VCs). This is where Northern Ireland seems to be on point. We're seeing impetus in this area via the Artificial Intelligence Collaboration Centre (AICC) , iReach and Momentum One Zero , as well other initiatives surrounding the City Deals. These initiatives are filling leadership positions and proactively engaging with industry.

The Smart Nano NI project is a £42m UKRI funded investment fixed on creating clustering around the Belfast-Derry economic corridor (full disclosure: I work with Analytics Engines currently who are a member of this group).

By consensus a reputedly successful programme like Horizon Europe (with a budget of close to €100 billion) is described as "excessively complex and bureaucratic, and is also insufficiently focused on disruptive innovation".

These conclusions on Horizon can operate as principles to guide a more practical funding model when designing policy interventions in Northern Ireland

What other lessons can we draw from the report? Draghi says Europe urgently needs to:

• re-evaluate its regulatory framework to become more pro-business whilst having enough counterbalances in place to avoid negative social impacts that we see in the US
• accelerate its rate of innovation both to maintain its manufacturing leadership and to develop new breakthrough technologies
• integrate AI into our existing industries so that they can stay at the front
• focus on the application of AI – and particularly generative AI – as an evolving technology where the position of market leader is still being contested in a range of segments
• and bring forward commercial exploitation of advanced research and patented inventions.

Many of the challenges articulated in this report are common to the region. But importantly, I can see that Northern Ireland has been making strong progress of late, and we are moving from vision and policy to implementation and actuality.

There's much more to take away from the report in other areas like Decarbonisation, Industrial Strategy and Transportation. It's certainly one of the most readable and insightful documents I've come across.

#NorthernIreland #Innovation #TechClusters #ProductivityGrowth #EUCompetitiveness #DigitalEconomy #RegulatoryReform #AIIntegration #BusinessGrowth #TechPolicy