Context
IW Consult has conducted a comprehensive study on behalf of the Eco Association on the relevance of AI data centres for Germany’s economic development. The result: data centres are the backbone of Germany’s digital transformation. The use of AI generates additional value creation potential of 330 billion euros. Companies that use data centres are more innovative and more successful. Germany as a whole could increase the annual rate of increase in labour productivity from 0.8% to 1.3%.
Data centres and the use of AI therefore play a key role in productivity, competitiveness and overall economic growth.
About
Dr. Henry Goecke
Bela Waldhauser
Interview
Gregor: Henry, in your study for the Eco Association, you make a connection between investment in AI infrastructure and economic growth in Germany. How did you come up with that?
Henry: In our survey of 500 companies, we were indeed able to confirm the positive correlation between digital infrastructure, AI utilisation and economic success.
Our key findings are: Two thirds of companies are using generative AI specifically to increase efficiency, over 80% of AI users are experiencing increases in productivity and 42% of the companies surveyed state that they are becoming more innovative by using generative AI to increase their innovative strength and thus develop new products or services.
It is particularly interesting to note that companies that use generative AI achieve a higher proportion of turnover with new products – for AI users this is a third, for non-users only a quarter. The difference is even clearer for data centre users: they increased their revenue share with new products by 30% between 2021 and 2023, while this increase was only 2% for non-users.
An efficient digital ecosystem is therefore essential for economic progress and forms the basis for productivity, innovation and material quality of life. Digitalisation is proving to be a key driver of value creation and sales growth by promoting innovation, productivity and efficiency.
Gregor: Sounds intuitively understandable. But you could also just have discovered a correlation. Companies that are innovative also like to try something with AI …
Henry: You’re right, there is the methodological challenge of distinguishing between correlation and causality. However, our study is based on a broad and diverse survey and consistently shows that there are positive correlations between digital infrastructure, AI utilisation and innovative strength in all specific questions.
Gregor: But does this AI infrastructure really have to be located in Germany? Wouldn’t data centres in countries with low electricity costs also suffice?
Bela: The question is justified, but the reality shows that data centres in Germany are not only necessary for cat videos on Instagram. Digitalisation has gained enormous momentum since the introduction of the iPhone in 2007 and is no longer just a matter for the military or large companies. Today, innovations are increasingly emerging in the private sector, and digital companies are actually making high profits. As a result, enterprise applications account for over 50% of usage.
Data centres enable paperless offices, electronic invoicing and digital transformation in companies and public authorities. I would even go so far as to say that we are the backbone of digital progress.
Proximity to these data centres is crucial for the innovative strength and competitiveness of German companies. It’s not just about favourable electricity costs, but about creating a robust digital ecosystem on site. This not only promotes the development of new technologies, but also secures jobs and contributes to Germany’s economic strength.
Gregor: So we don’t have an electricity problem with data centres?
Bela: The electricity consumption of data centres only accounts for 3% of German electricity consumption. This corresponds to just 0.6% of total energy consumption. On the other hand, with the intelligence we provide, we contribute to considerable efficiency gains elsewhere. This helps to optimise the use of energy and resources in society as a whole in the long term. A one-sided focus on a single input factor also makes no economic sense. For example, the number of workers in Germany will fall by at least 1.1 million by 2028. Without AI, which of course consumes electricity, we will not be able to cope with the shortage of skilled labour or the ever-increasing workload in companies.
Gregor: But I have to ask one more question. Big Tech invested €220 billion in cloud and AI infrastructure last year. Germany accounted for around €15 billion of that. Isn’t that enough for us?
Henry: Big tech investments are important, but not enough. The choice of location is not just about latency, i.e. the question of how quickly the data gets from the data centre to the user. Geopolitical factors are playing an increasingly important role. The world is in a phase of de-globalisation, and data and infrastructure sovereignty are becoming increasingly important. Europe and Germany must therefore strengthen their digital infrastructure and technological independence accordingly in order to remain competitive. We must not rely solely on foreign investment, but must actively invest in our digital future.
Gregor: This realisation has practically been common sense since the first Trump administration. Why is there so little political commitment to accelerating the expansion of data centres?
Bela: The problem lies in the perception and assessment of digital growth by politicians. I often hear ‚You’re already growing 10% per year, why are you complaining?“ Politicians overlook the fact that the new economy is progressing much faster than the traditional economy. Our reference value is not the traditional growth rates of the chemical industry or mechanical engineering. When it comes to digital competitiveness, global big tech sets the standard. This is where we see that Europe is continuously losing market share. Politicians and treasurers are focussing too much on absolute growth figures without taking into account the relative loss of importance in an international comparison.
What we need is a change in awareness in politics and society: apparently good growth in the European digital sector is not enough to remain competitive. The study by the Eco Association now clearly shows that a comprehensive investment programme focusing on digitalisation and a competitive AI infrastructure would be the starting point for our race to catch up.
Gregor: Rethinking? As you can see from the military’s turnaround, many people find this difficult for a long time. But when it happens, it happens very quickly. What specifically would you like to see?
Henry: Investments in data centres create jobs related to power supply, air conditioning technology, IT hardware and software. However, the real economic effect is created by digitalisation in the downstream sectors. For example, the number of jobs linked to cloud services has doubled since 2022, which corresponds to a monthly increase of 126,000 jobs. The resulting added value amounts to around 250 billion euros per year.
We therefore propose accelerating the digitalisation of our economy through a special tax write-off for digital investments.
Bela: This would motivate small and medium-sized enterprises (SMEs) in particular to invest more in digital technologies. I used to say: “Except for the kebab shop, all companies need to digitalise”. But then I learnt that even there, digital sales models such as Uber Eats have arrived. Now I say: “Even the kebab shop has to digitalise”. With a digitalisation effort across society as a whole, the shoe will drop: all companies will become more efficient, digitalise their business models and grow via new sales channels. We as a society can compensate for the decline in the working population and still grow.
But the key is: digitalisation, digitalisation, digitalisation. This increasing demand would then also incentivise investment in local AI infrastructure and gradually secure us more European sovereignty.
Gregor: Bela and Henry, thank you very much for your time!
