EU Data Act May Carry Significant Costs for Companies Working Across Borders

EU Data Act May Carry Significant Costs for Companies Working Across Borders

The EU has set ambitious targets for the digitalisation of society and business as part of its “Digital Decade” initiative.

At the same time, there are several EU legislative proposals that aim to regulate the use of digital technology and the processing of data, potentially including new restrictions to the international flows of non-personal commercial data.  This includes the Artificial Intelligence Act and the upcoming EU Data Act scheduled to be released on 23 February.

Meeting the objective of unlocking the benefits of digitalisation requires careful consideration to minimise unnecessary costs and avoid unintended consequences of new regulations. The findings described below attempt to quantify one of the key components of such possible unintended consequences.

Sarah Snelson, Director in Public Policy for Frontier Economics, sees the potential for significant disruption:

“Transferring commercial, non-personal data across regions is essential for many European companies. Our study shows that new transfer restrictions beyond personal data would entail significant disruption on how companies innovate, collaborate with subsidiaries and commercial partners. The costs of this disruption could be around 0.6% of EU GDP – larger than many EU funding initiatives aimed at supporting the digitalisation of European economies.”

Our study, commissioned by the CCIA (Computer & Communications Industry Association), provides new evidence on how EU businesses transfer data across borders and the likely effects of restrictions to such data flows on EU businesses’ operations, summarised below:

  • Restrictions to international flows of non-personal data could lead to a gross domestic product (GDP) loss of EUR 79bn per year across the EU or EUR 553bn over 2021-2027. To put this into context, this is almost six times the amount (EUR 95bn) that the EU will be spending to boost research and innovation under the Horizon Europe framework programme for the same period.
  • This GDP loss would result from the negative impact of the restrictions on EU-based scaleups and other EU enterprises that operate internationally.
  • The negative impact of restrictions would be larger for businesses that share data as part of their innovation activities.

Sarah Snelson will discuss the report and its findings at a virtual roundtable hosted by the Atlantic Council today at 17.30 CET, along with Eva Maydell, MEP, and Peter Fatelnig, Minister-Counsellor, Delegation of the EU to the U.S.

Frontier Economics regularly advises governments and leading global companies seeking to tackle complex problems with clear, rigorously researched solutions.

Read the full report by clicking below.

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Beyond personal data: The cost of data flow restrictions to EU companies