Europe’s productivity puzzle: Is outdated workplace tech to blame?

Productivity growth in Europe is uneven and slowing – a trend that shows no signs of improving. As hybrid work becomes the norm and economic pressures intensify, many organisations are asking a fundamental question:

Why isn't productivity keeping pace with expectation?

The answer, in many cases, lies not in external market conditions, but in the very tools businesses rely on daily. Despite rising expectations for flexibility, collaboration, and efficiency, many organisations are still tethered to legacy systems that no longer meet the needs of a modern workforce. And while some are accelerating by embracing digital transformation, others are falling behind, creating a widening productivity gap.

To truly address the productivity puzzle, European businesses must look inward at systems, technologies and workflows that shape work. It's no longer enough to make surface-level changes or incremental upgrades. Real productivity gains will result from reimagining workplaces to align with how people want and need to work today. 

A shifting productivity landscape

The economies traditionally seen as Europe's productivity leaders, such as Germany and The Netherlands, are no longer holding that position. In fact, according to our latest research, Spain is quickly becoming one of Europe's most productive economies among office workers. An impressive 92% of Spanish employees report high productivity, which has translated into a 3.2% GDP boost in the last year alone. This shift challenges long-standing assumptions that productivity is automatically strongest in high-tech manufacturing countries, or those with a large professional services sector.

In contrast, in the UK, France and Germany, productivity is lagging and our research shows why: many employees in these countries are struggling with outdated tools. In the UK and Ireland, just one in four (28%) workers say they have what they need to collaborate effectively. In France and Germany, a quarter (22% and 27% respectively) of business leaders cited outdated technology as a leading barrier to employee productivity.  

To put it plainly, businesses are being held back by outdated tools, creating a big disconnect between ambition and performance. In many cases, it's not a lack of effort, but a failure to evolve workplace systems in ways that support employees meaningfully.

The digital workspace divide

The expectations of the modern workforce are shifting too. Employees increasingly value speed, flexibility and seamless communication, with previous research revealing that having better technology would make workers less likely to consider leaving their current role in the next 12 months. More and more, employees are asking for smarter solutions that align with rapid technological changes and better fit the way people now work. These include more advanced collaboration platforms, automation to eliminate repetitive tasks, and systems that are easier and more intuitive to use. However, in many organisations, investment in the digital workspace hasn't kept up with employee expectations or needs. According to KPMG, only 54% of European employees say their employer has adopted new technologies over the past three years. This investment lag impacts day-to-day productivity, but more than that, it affects employee satisfaction and ultimately, business performance.

Creating a quality workplace experience is critical for this. When organisations design digital and physical environments centred on how people do and want to work, they can unlock new levels of engagement and effectiveness. A well-crafted workplace experience is no longer a nice-to-have; it's a strategic differentiator that enables people to perform at their best.

From upgrades to true transformation

For many businesses, the default response to these challenges has been superficial upgrades, such as providing new laptops or introducing collaboration apps. But such isolated fixes evidently don't address the real issues at play.

What's needed is a full rethink of the workspace – both physical and digital – which involves aligning technology with the way people actually do things. If companies can streamline workflows, support hybrid collaboration, and reduce manual processes, they'll be far better equipped to meet employee needs.

By introducing process automation technologies, businesses can boost efficiency as well as show employees that their time and wellbeing are valued, and that they are being supported.

The cost of outdated systems is lost potential too. When technology slows people down, it drags everything with it, from output and morale to innovation and customer experience. And the longer businesses wait to modernise, the bigger the difference becomes.

Importantly, transformation is both a technology issue as well as a leadership one. Leaders must go beyond approving tools; they need to create a culture where innovation is expected, and employee experience is prioritised.

The most successful organisations are the ones embedding digital empowerment into their business models, and equipping people with tools that help them work smarter, not harder. By removing friction, supporting autonomy and ensuring the right tools are in place, companies create the conditions for employee success.

The future belongs to digitally empowered businesses

As we look ahead, one thing is clear: productivity and technology are now inseparable. For European businesses, success depends on modernising the workplace, not just through better tools, but by enabling a culture of innovation and support.

The question isn't whether leaders can afford to modernise, but whether they can afford not to. Closing the productivity gap starts with investing in the technology, leadership and mindset needed to empower people to work smarter.