Digital technologies are transforming our world – not only the experience for consumers but increasingly how businesses of all shapes and sizes operate. Getting this right has never been more important for the competitiveness of Europe. A functioning digital single market which eliminates current hurdles can contribute €415 billion a year to our economy and can help creating new jobs. If we however fail to tear down existing online barriers this will shrink the horizons for European companies, start-ups and consequently for European consumers.

The digital economy

The Digital Single Market (DSM) strategy launched in May 2015, set out an ambitious framework to address the issue, focusing on three key areas – improving access to digital goods and services; leveling the marketplace to buy and sell; and building an environment where digital networks and services can prosper. Soon we will enjoy the first tangible results with the new rules on cross-border portability, which enables consumers to access their online subscriptions when they travel across the EU. Still, more pressure is needed at the mid-term review of the strategy to drive it forward.

The European Commission has recognised that ‘unnecessary restrictions regarding the location of data within the EU should both be removed and prevented’. It later promised a European ‘free flow of data’ legislative proposal to tackle restrictions on the free movement of data within the EU and unjustified restrictions on data location.

With the European data economy valued at €272 billion in 2015 (year-on-year growth of 5.6% according to the European data market study), this global trend holds enormous potential in fields where Europe cannot afford to miss, like health, food security, climate and resource efficiency; and from energy to intelligent transport systems and smart cities. Ensuring free flow of data is therefore central to the success of the digital economy in this region.

This isn’t a new concept; in fact, European companies have been leading the way in digital innovation for many years, using data as a starting point. But with barriers in place, the opportunity to expand has been curtailed.

The fourth industrial revolution – the fusion of technologies blurring the lines between the physical, digital and biological spheres – leading to advances in areas such as supply chain automation, robotics and 3D printing – is having a profound impact on industry too, creating enormous opportunities for the region’s economy.

The lifeblood of the revolution

And the lifeblood of this digital revolution is data, both personal and commercial. Its free flow is what makes the digital economy function and has been vital for growth. If Europe is to achieve its full potential, this data flow should not be obstructed by local or national measures.

As the value of data has increased, however, the temptation of national administrations to claim entitlement over its control has also shot up. Data localisation requirements in national legislation and public procurement rules across the Member States are increasingly restricting this necessary flow of data and fragmenting the Single Market.

The Commission’s own reports highlight that data localisation measures effectively reintroduce digital border controls. Such protectionist measures prevent our companies, especially SMEs, from scaling-up and have the effect of locking them into nationally segmented markets. As a consequence, both private and public customers pay more for less choice and innovation is weakened.

There is palpable demand and huge growth across the digital economy in Europe, despite the barriers in place. Just think of the significant leaps forward we could achieve if we can get the policy framework right and let data flow free.