IT Contractors thwarted in attempts to take europe by storm

Germany has successfully neutered the new EU Services Directive, thus blocking a real opportunity for UK IT contractors to break into the European market on highly competitive terms. This is the view of Barry Roback, Chief Executive of JSA Services, the UK’s number one specialist accountants for IT contractors.

There is no doubt that had this directive not had its heart cut out by vested interests, IT contractors would have had a huge opportunity to extend their experience by working in one or more of the ever-expanding number of EU member countries claims Roback. Norbert Glante, a German member of the Economic and Monetary Affairs committee was right when he said that the EU Services Directive ’took off as a tiger and landed as a fire side rug’. While there is nothing new about France and Germany manipulating EU proposals to suit their own ends, the new measure is a mere shadow of its original intention.

The initial aim of the directive was to break down barriers to cross border trade in services between EU Member States, by making it easier for service providers such as agencies and contractors to provide services temporarily and/or at a distance, based on the rules in the country in which they were based. Although MEPs have just approved the directive by 391 vote to 213, it has been heavily watered down to protect jobs in richer member states - primarily France and Germany.

The European Commission originally proposed the directive in the hope of encouraging the free flow of services around the EU in order to create greater competition. The EU estimates that in the 10 years since the completion of the first single market programme in 1993, at least 2.5 million extra jobs have been created as a result of the removal of barriers. The increase in wealth attributable to the Internal Market in those 10 years is nearly Ä 900 billion or about Ä 6000 per family in the EU.

Roback points out that at present, if contractors work in any EU country, they are subject to local employment regulations. These are often highly restrictive and make it not particularly attractive for continental end-users to hire UK-based staff. A survey by the European Commission in 2002, identified some 91 barriers that service providers have faced in providing services across borders The Commission concluded that many service sectors were hampered by problems such as burdensome authorisation procedures, excessive red tape and legal uncertainty. The current services directive was meant to address this issue.

However the recent machinations of politicians and trades unionists have thwarted the opportunity for UK contractors to take advantage of a more flexible labour market within the EU says Roback. This is a real disappointment for IT contractors throughout the EU, who saw a real chance to widen employment opportunities. From the UK IT contractors’ point of view, the crucial point at issue is that MEPs rejected a proposal that would have enabled companies to provide services abroad under the regulations of their home country.

Exempted areas will now include broadcasting, postal services, audio-visual services, temporary employment agencies, legal services, social services, public transport and gambling - and also public, but not private, health. There are also a number of legitimate grounds for restricting foreign companies includes such things as national security, public health and protecting the environment.

The recruitment industry is obviously disappointed by this outcome comments Roback and is lobbying for changes when the member states meet at a summit later this month. In a sense it is an old-fashioned battle between left and right, laced with a big dollop of protectionism, which still dominates most political arguments in Brussels. The business world broadly takes the view that the compromise will fail to bring the benefits envisaged by the European Commission - the creation of 600,000 jobs and an increase of 1% to 3% in the EU’s economic output, while the European Trade Union Confederation has hailed it as a ëreal victory for European workers’.

In reality, it is unlikely that the country of origin principle - which would have allowed service providers to remain governed by their own country’s regulations wherever they were operating - is likely to be reinstated.There are fears - some possibly genuine - that if workers from say Poland, were able to work under their own country’s weak health and safety rules, they would put other workers in danger.

Nonetheless, the UK recruitment industry is doing its best to change minds in Brussels. The Association of Technology Staffing Companies (ATSCo) is working with Malcolm Harbour MEP, member of the Internal Market Committee, on draft proposals to deregulate the technology staffing industry across the EU and says that freeing up the ICT temporary workers market is vital to ensuring Europe achieves long-term goals of technological advancement, international competitiveness and the Lisbon agenda.

ATSCo held face-to-face talks with Mr Harbour MEP ahead of the recent European Parliament vote but its lobbying has been unsuccessful so far. Agencies mainly believe that the exclusion of the recruitment industry is a wasted opportunity and ATSCo has put its concerns to Ian Pearson MP, the Trade Minister. As ATSCo’s Chief Executive Anne Swaine puts it: Concerns the EU Parliament had about cheap labour from Eastern Europe are not relevant to the technology sector where workers are highly paid and view freelancing as a lifestyle benefit. That’s the message we will continue to try to get across.

Barry Roback notes that Arlene McCarthy, a UK MEP and chairwoman of the internal market committee, said recently that she was proud of the ’mature and responsible way in which the European parliament built a consensus on behalf of our citizens for the opening of the market on services. The parliament’s vote is historic. It is the final piece in the jigsaw of establishing the internal market.’

He concludes: Sad to say she is wrong. Until the EU is opened up to a genuinely free market for service providers, such as IT contractors and the agencies who represent them, the jigsaw remains far from complete.