EU Ministers agree on Services Directive

Political agreement was reached on the Services Directive yesterday, a law that promises to cut the red tape that currently prevents businesses from offering their services across EU borders or from opening premises in other Member States.

The EU Council of Ministers voted unanimously for the measure (although the Belgian and Lithuanian delegations abstained) and the Council will adopt its common position at a forthcoming meeting after finalisation of the text. It will then pass to the European Parliament for a second reading.

Under the new Directive, a business will be able to complete all formalities for setting up anywhere in the EU online and through a single point of contact. Tests for "economic needs" – expensive procedures requiring businesses to prove to authorities that they will not "destabilise" local competition by setting up – will no longer be allowed.

The UK is expected to be one of the main beneficiaries of the Services Directive. Based on a study by Copenhagen Economics, the Directive is estimated to be worth approximately £5 billion a year to the UK economy – boosting services such as construction companies, retailing, management consultancies, advertising companies, estate agents, architects, plumbers, bakers, electricians and leisure services.

The Directive has had a difficult journey since first being proposed in January 2004 and the Council's agreement is based on a compromise text put forward by the Austrian Presidency which narrowed the scope of the Directive. Fewer services are caught than originally planned: financial services, telecoms and healthcare services are among the exclusions. Also, a 'country of origin' principle has been removed, which would have entitled European traders to work in any Member State while complying only with the relevant laws of the their home state.