Oscar Guinea / Sep 2025
Ursula von der Leyen giving the 'State of the Union' address, 10 September 2025. Photo: European Union, 2025
When Paul Adamson sat down with Nick Clegg for the Encompass’ podcast, the conversation ended with something of a cry for help. Clegg, the former British deputy prime minister and former president of global affairs at Meta, warned that the EU has spent the past five years pouring political energy into the wrong priorities. Instead of creating a functional digital single market to allow European firms to scale, Brussels has been busy “beating up American technology companies” and passing laws to “clip the wings of big tech.” His book 'How to Save the Internet - The Threat to Global Connection in the Age of AI and Political Conflict' has just been published.
He is right. And it’s not only Clegg’s intuition that tells us so. We have run the numbers that back up these arguments. Our latest study, Breaking Barriers, Boosting Growth, shows that Europe’s digital ambitions are thwarted by its own rules. The EU’s regulatory environment makes it harder for firms to adopt digital technologies or launch new digital businesses. That in turn reduces competitiveness. The effect is measurable: we estimate that restrictive regulations depress EU private sector value added by 1.3 per cent. That may sound like a rounding error, but when applied to the EU’s €10 trillion private sector economy in 2022, it amounts to tens of billions of euros lost each year.
How does this work in practice? Imagine a European entrepreneur with a promising digital product. Unlike her peers in the US or China, she cannot immediately reach hundreds of millions of customers. Instead, she must thread her way through a maze of national licensing systems, conflicting data protection rules, and overlapping EU and national obligations.
Discouraged by red tape, many firms shy away from digital investments altogether. The whole point of digital services is that they can scale at near-zero marginal cost. But in Europe, scaling up is impossible when every new market entry brings another round of regulatory expenses. No wonder so few digital champions emerge on the continent. Many are killed off before they get the chance to grow.
This is not a marginal problem. The absence of a genuine single market for services sits at the heart of Europe’s competitiveness challenge. It is not just about whether accountants can offer their services across borders or whether lorry drivers can move goods through the EU. It is also about whether Europe can create the conditions for new digital businesses, industries, and technologies to thrive.
If European companies fail to adopt cutting-edge digital tools or build new businesses around them, others will. The US and China are already pulling ahead in Artificial Intelligence. Europe risks sliding into relative economic decline, with dwindling capacity to set its own course in the world. Talk of “strategic autonomy” rings hollow without a competitive EU economy.
That is why the EU’s proposed Digital Omnibus is important. Henna Virkkunen, the European Commissioner responsible for digital affairs, comes from Finland, the EU country where more firms use digital technologies than anywhere else. If anyone understands the power of digital diffusion, it should be her.
But lowering the reporting requirements of EU digital regulation is not enough. The EU must dismantle the barriers that still hold back digital and non-digital services. That is why the latest State of the Union address by Commission President Ursula von der Leyen mattered. For the first time, she acknowledged the problem and proposed a Single Market Roadmap to 2028 for services. Let us hope that, this second time, the von der Leyen Commission invests its energy and political capital in the right priorities: helping European firms grow, compete, and thrive. After all, if there is one thing that both Ursula von der Leyen and Nick Clegg agree on, it is that reforming the EU’s single market for services is the key to Europe’s prosperity.
