A new European research report reveals that artificial intelligence is on track to overhaul businesses in 2025, with over two-thirds expected to integrate AI-powered software by the end of next year. 

While AI is set to redefine many industries in the year ahead, not all sectors and markets are equally positioned to benefit, the State of European BusinessTech 2024 report found. 

It paints a nuanced picture of European BusinessTech, highlighting both transformative potential and emerging disparities expected in 2025. 

Contrary to fears that AI might disrupt the Software-as-a-Service (SaaS) model, the report highlights that AI is supercharging SaaS growth rather than replacing it. 

The report found that businesses are increasingly turning to SaaS solutions enhanced with AI capabilities, driving a surge in spending.

In 2024 alone, investment in SaaS and supporting tech infrastructure grew by over 20%, while spending on Generative AI infrastructure surged by 30%.

The report highlights that workforce disparities are becoming more pronounced in Europe with automation advancing rapidly in desk-based roles, such as sectors like tax, accounting, HR and legal seeing AI adoption rates as high as 85%. 

The legal and regulatory sectors have seen AI adoption jump from 17% to 79% in just two years, signalling a dramatic shift in how businesses approach compliance and legal frameworks.

However, 80% of Europe’s workers – those in deskless roles such as medical, industrial, hospitality and retail sectors – are being largely left behind, according to the report.

These workers receive only 1% of enterprise software funding, highlighting a critical gap in digital transformation efforts.

This divide is further exacerbated by broader funding trends identified in the report. 

While midmarket M&A activity remains strong, particularly for deals under €500m, the lack of significant VC-backed exits above this threshold since 2022 suggests that capital flows are not aligning with the scale required for systemic transformation. 

Combined with a 26% drop in business technology funding across Europe in the first half of 2024, these challenges could slow the region’s progress toward a more inclusive AI-powered economy, the report found.

The report, authored by European growth capital firm Finch Capital, reveals largely dynamic BusinessTech funding across Europe, with the UK firmly retaining its position as the leading hub.

The UK accounted for more than 50% of all capital raised in Europe, driven by record-breaking investment in AI for customer support, analytics and process automation. 

Over £6bn was invested in UK data centres last year to prepare for the AI era, and BusinessTech funding surged by 83% year-on-year in the first half of 2024, reaching €2.9bn compared to €1.6bn in the same period last year.

The Netherlands, meanwhile, boasts a thriving startup ecosystem centered in Amsterdam, now home to a record 4,000 active startups.

Despite this growth, BusinessTech funding in the Netherlands declined by 23% year-on-year for the first half of 2024, signalling challenges in maintaining investment momentum. 

In contrast, Ireland experienced exceptional growth, with BusinessTech funding increasing by 123% year-on-year to €49m.

The largest deal in the sector came from AccountsIQ, which raised €60m in a Series C round.

France is positioning itself as a leader in AI innovation with ambitious programmes like Mistrall AI.

BusinessTech funding in the country surged by 238% in the first half of 2024 to €1.2bn, up from €343m during the same period last year. 

Spain also saw significant growth, driven by a strong focus on cloud infrastructure investments.

Amazon’s announcement of a €15.7bn investment in the country over the next decade aligns with a 227% increase in BusinessTech funding to €170m, compared to €52m in H1 2023.

However, not all markets experienced growth. Germany saw a sharp 80% decline in BusinessTech funding, falling to €145m in the first half of 2024, compared to €720m in the same period last year. 

Commenting on the report’s findings, Aman Ghei, Managing Partner at Finch Capital said: “AI is not a disruptor but an enabler for European BusinessTech.

“The sector is entering a golden age of transformation, with opportunities for growth and consolidation.

“Companies that embrace AI, focus on profitability and align with strategic trends will define the future of this ecosystem.

“Despite fears that AI is going to replace software, the report found that the demand for AI-enhanced SaaS solutions is only intensifying as businesses seek to streamline processes and make smarter, data-driven decisions.

“This is more than a trend; it’s a transformation of core operations, where companies leveraging AI are not just navigating uncertainty but driving growth.

“However, as the report highlights, not all sectors or markets are equally positioned to reap the benefits of AI, and that imbalance needs to be addressed. Despite advancements, workforce disparities are becoming more pronounced.

“The contraction in the funding landscape also reflects a shift in investor priorities toward capital-efficient, growth-oriented companies, with EBITDA margins and revenue growth now critical valuation drivers.

“Looking ahead to 2025, the report shows strong momentum for BusinessTech, with several factors underpinning this growth.

“A surge in AI-driven SaaS adoption, supported by demonstrable ROI metrics, is anticipated. Additionally, increased enterprise M&A activity will likely accelerate as firms seek unified, end-to-end solutions.

“Strategic investments in deskless worker solutions, compliance tooling, and CFO-driven software are also expected to gain traction, further cementing AI’s role as an enabler of innovation.”