Why Allianz Believes Robotics Are Europe’s Best Bet for a Productivity Comeback

Europe’s productivity engine is faltering, and this is especially visible in its manufacturing sector. Between Q4 2019 and Q1 2024, labor productivity in Eurozone industry rose by just +0.8%, while US industry improved its productivity by +8.8% over the same period (see Figure 19). This gap is not new, but it is now widening at an alarming pace. The divergence seems to be structural and a number of reasons have been put forward to explain it: (i) The digitalization lag: European firms, particularly SMEs, have been slower to adopt digital technologies that drive productivity. (ii) The investment gap: US companies have consistently invested more per worker, particularly in high-return areas like automation, while European investment remains skewed towards lower-productivity sectors. (iii) Firm demographics: The US economy features a higher share of dynamic, fastgrowing firms – often tech-driven – whereas Europe’s firm population is older, smaller and less prone to scale. Finally, (iv) labor market fragmentation: European labor markets remain more regulated and slower to reallocate workers to more productive firms, sectors or regions.

This is where robotics offers a clear, evidence-backed path forward. Industrial robots raise output, reduce rework and waste and allow for continuous operation without proportional increases in labor. Their productivity impact is quantifiable: It is estimated that robots contributed 5% of productivity growth in 17 OECD economies between 1993 and 2007. More recent firm-level studies also show productivity gains of about 10% within two years of robot deployment¹. In Europe’s own factories, the returns are increasingly well-documented. Importantly, these gains extend to SMEs. Adopting robots – even in low-tech sectors like plastics and wood processing – allows companies to gain marked improvements in labor productivity and product quality. Although all industries did not adopt robots to the same extent, the effects are visible at the industry level when deployed. In the automotive sector, one of the most robotized globally, robot use has been linked to labor productivity growth of up to 20% over a decade. In metal and machinery manufacturing – sectors with traditionally slower productivity growth – robot deployment has improved multi-factor productivity by 5-8% across Europe over five-year horizons. European food processors using robotic packaging, inspection and palletization systems achieved 10-15% increases in output per labor hour, particularly where labor shortages had previously constrained throughput. In logistics and warehousing, where service robots are being adopted for order picking and transport, labor productivity has increased significantly in leading pilot deployments across Germany and the Netherlands. What makes these achievements compelling is that productivity growth is occurring even in mature industries with relatively low digital intensity. Robots are not just tools for high-tech verticals – they are now viable for general manufacturing, thanks to falling unit costs and simplified integration. The resulting productivity payoff is no longer limited to factory giants: it is and will be more and more available to mid-sized firms and regional industrial clusters.