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EU Member States impose a large number of barriers to providing services across borders, which hinder productivity and growth, reduce consumer choice and value for money, and block export and growth opportunities for the service sector. Services currently account for only 20% of cross-border trade in the EU, despite accounting for 70% of GDP in the EU.
Examples of barriers found in the EU include:
• difficulties in obtaining information on what formalities are required in order to become established
• nationality restrictions
• overly bureaucratic, complicated and lengthy authorisation procedures (sometimes applied unevenly to providers of different nationalities)
• requirements for excessive financial guarantees (making it difficult for SMEs to compete against national industries)
• requirements to undertake market assessments or otherwise ‘prove’ the need for the service
• restrictions on professionals such as lawyers in mentioning their particular specialisation in communications with the public, limiting their ability to attract new custom
The Government's formal consultation has now closed. However we continue to meet stakeholders on a more informal basis to discuss particular implementation issues.
BERR is responsible for coordinating the implementation with colleagues across Whitehall, Local Authorities and Regulators. We are working with the devolved administrations to consider how to implement issues that fall within devolved competence.
Member States must implement the Directive by 28 December 2009, after which they must report to the European Commission on their progress and will then peer-review implementation by other Member States.
It is intended to apply alongside and complementary to other sector-specific pieces of legislation.
The aim of the Directive is to make it easier for businesses both to set up in other Member States of the EU and to provide services cross-borders or on a temporary basis. It will achieve this through:
• Abolishing restrictive legislation and practices that hinder service providers from setting up in or providing services within the EU
• Setting up Points of Single Contact in each Member State through which providers will be able to find the information and complete the formalities necessary to doing business in the Member State in question
• Facilitating greater co-operation between regulatory and authorisation bodies across the EU thereby reducing burdens on business
• Engendering consumer confidence in cross-border service provision through access to information and the high quality of services
Where a service provider travels to another Member State to provide services, a distinction is drawn between the cases where the service provider establishes himself in that Member State, and the cases where the activities are provided only temporarily. This can sometimes be a difficult distinction to draw. According to the caselaw of the Court of Justice, in deciding whether service activities are being provided temporarily, you need to look at the duration of the service and whether it is regular, periodical or continuous.
The Directive deals with requirements imposed upon both temporary and established service providers. Stricter controls are imposed upon the requirements that can be imposed upon temporary service providers.
Establishment is about formally setting up business in another Member State. A temporary provider is where a service provider can temporarily provide a service either in a short-term basis or at a distance across borders.
Each Member State is required to establish a Point of Single Contact, which will be an electronic means through which service providers can find the information and complete the necessary formalities necessary to doing business there.
We are planning to establish a single PSC for the whole of the UK that will be free to access, kept up to date in an effective manner, does not duplicate the role of competent authorities, signposts useful information on matters such as tax and employment that are outside the scope of the Directive, and provides effective support for users.
We recognise that it will be important for the information on the PSC to be accurate and up to date. We intend to introduce a legal obligation on providers of information to the PSC to keep data up to date and accurate. We will also investigate further options for dealing with situations where information obtained through the PSC proves to be inaccurate or incomplete, bearing in mind existing legal constraints as well as developments being considered as part of the Enterprise Review, which is due to report in the autumn.
Member States are allowed to charge for access to their PSCs. Although we do not plan to charge users for accessing the PSC, we are planning to consider further the issue of charging users for some support services.
This is the process whereby Competent Authorities (regulators and licence issuers like local authorities) in different Member States are to cooperate more fully in the supervision of service providers operating in more than one Member State. This will mean less burden on business, for example where member states currently duplicate checks on service providers' documentation. The European Commission will be providing Member States with an electronic system - The Internal Market Information System (IMI) - to enable direct communication between regulators to this effect.
The mutual assistance Articles of the Directive require the Government to ensure that competent authorities (bodies with a regulatory or supervisory role regarding service provision) co-operate effectively with their counterparts in other Member States. We do not expect this to result in any sudden surge in workload when the Directive is implemented. Although we do not plan to require competent authorities to use the Internal Market Information System (IMI) being developed by the European Commission, we will be providing training and guidance as well as a national co-ordinator located in BERR, in order to maximise the benefits of the system.
The vast majority of service providers are SMEs. But SMEs are often put off from seeking to sell their services elsewhere in Europe by the high costs of investigating possibilities, both in terms of time and financial expense. SMEs will therefore benefit from the more liberal regime the Directive seeks to introduce.
Most usefully, the Directive's provisions will allow SMEs to test new EU markets without the need to set up there, which at the moment is prohibitively expensive for the majority of them. Furthermore, the points of single contact will particularly help SMEs to take advantage of the more open market by providing a single resource to find out how they can offer services in each Member State.
The Directive covers a wide range of different services, including:
Business Services such as: management consultancy; advertising; certification and testing; facilities management, including office maintenance; and the services of commercial agents.
The Directive does not include: financial services; electronic communications and networks (to the extent that they are covered by the European Community telecoms legislation package);transport and transport-related services falling under TEC Title V and including port services; healthcare services; services of temporary work agencies; audiovisual services; gambling activities; activities connected with the exercise of official authority; social services relating to social housing, childcare and support of families and persons in need; private security services; notaries; bailiffs and all taxation. Labour law and criminal law are also excluded.
A study on the original proposal by Copenhagen Economics (published 2004) on behalf of the Commission found that the proposed Directive would benefit all Member States, delivering productivity, increased employment, higher wages and cheaper services for consumers.
We estimate (in the latest Impact Assessment) that the Directive will result in significant benefits to the UK, to the tune of:
For links to studies see Economics and evidence.