Towards a digital-first world? The reset of the economy in Europe

After over a year living with Covid-19, this milestone sees us looking for signs of a return of normality. And while the trauma of the past year is still raw, some economists are optimistic that the coming years will see a Roaring 20’s -style jubilant resurgence of consumer spend following a year of pent-up demand, which will hopefully kick-start a reset of the economy across Europe. Many are curious to what that might look like after a year spent in hibernation when many consumer behaviours change dramatically.

The phrase the “new normal” keeps being discussed as a warning that life won’t resume to what it was pre-2020, because so many habits were set during lockdown, with digital at the heart of most consumer behaviours. The question is what will the “next normal” look like as we emerge into a world that has fundamentally changed forever?

The pandemic has led to an unprecedented consumption shock across Europe and the world..While some might like to think we’ll just go back to our old behaviours and ways of working pre-COVID, .there will be deep-emotive changes, powered by consumers whose lives and habits shifted over the course of the pandemic. Many customers who have tried out online grocery services during lockdown are unlikely to go back to shopping in store, while the humble handshake… well, let’s revisit that in a year’s time and see if we’re still elbow bumping each other in business meetings.

The return of consumer confidence

Retail, hospitality and travel are industries that have been hit hard by the pandemic and their reopening will most likely set the tone to what extent consumer confidence returns in the coming months. Going forward, consumers will expect a slick experience online and an engaging, exciting experience on their high streets, and when they finally get to travel again.

The aftermath of the pandemic is still open. The EU Commission has been predicting in February 2021 that the EU economy will grow by 3.7% in 2021 and 3.9% in 2022, with countries like Spain and Greece needing a little longer to see economic growth once again. It remains to be seen if the vaccine roll-out accelerates across the continent and if renewed waves and new variants of the virus will potentially interfere with recovery, but overall the easing of lockdowns towards summer and the vaccination campaigns will only have a positive knock-on effect on business.

Digital boom

When we look across Europe, digital adoption is now almost universal at 95%, compared to 81% at the start of the pandemic. Under normal circumstances this growth would have taken two or three years.

Interestingly, the biggest adoption of technology is from countries that have previously been cautious about digital, including countries such as Germany and Switzerland, which had some of the lowest online-penetration rates prior to the Covid-19 crisis, but have since respectively increased 28 and 18 percentage points – more than in any other EU states.

You only have to look at the financial services industry and the innovation coming out of unbanked countries which leapfrogged decades of technology development straight into mobile banking to understand that sometimes having a blank canvas and starting from scratch provides the opportunity to truly innovate as you are not constantly being tangled up in legacy systems that prevent you from trying something new. The same goes for digital government. Take a look at Estonia, the country was left with no government infrastructure in the early 1990s when the Soviet Union withdrew its occupation, but now the nation is seen as an emerging global technology power with Estonia citizens able to access all government services online, long before any other countries. Will larger countries in the EU now follow suit?

Times of crises have frequently driven structural change and allowed growth to come from new and exciting areas – take the last recession and the boom of digital start-ups and new business models that followed shortly afterwards which were the small businesses that drove technological change we are all benefitting from today. It’s exciting to think about what might grow from the ashes of Covid-19, with edtech, fintech, wellness, HR and, of course delivery and eCommerce, pinpointed as the likely areas for innovation.

But with hopes for economic growth, it is critical that businesses keep an open mind as these digital trends may have a negative impact on some companies. Look at city centres as an example, if more consumers are going to continue working from home for 2-3 days a week going forward, what will happen to those town-centre businesses which relied on their footfall? How will they pivot towards new revenue streams?

Digital transformation is more than just getting used to jumping on a Zoom call rather than attending an in-person meeting, it’s about ensuring your entire business model is thinking digitally. Now is the time to act, as 2021 will be the year of transition, so make sure you don’t fall behind in the race for recovery.