EU Policy – UK Business

With the European elections less than three weeks away Liverpool Chamber of Commerce is urging business leaders to consider the implications of EU legislation on UK business and the UK economy.

Liverpool Chamber’s Head of Policy, Maresa Molloy stated: “Business leaders need to be aware of the following key changes to UK legislation implemented by the European Parliament.”

1. Agency Workers and the Working Time Directive
2. Pregnant Workers
3. Small Business Act. & 3a. European Company Statute
4. Regulatory Reform
5. Late Payment Directive
6. Services Directive.
7. EU Recovery Plan.

1). Agency Temps and Working Time Directive

Following a deal between the CBI and the TUC, the UK Government removed its opposition to the Agency Workers Directive.  Employment ministers across the EU agreed that temporary workers should enjoy equal rights as permanent workers from the first day of their employment; the UK government won a concession that it could apply the rule of equal treatment from 12 weeks into employment.  In addition, the other member states agreed that the UK could keep its opt-out from the Working Time directive, up for review but also blocked in Council.

A majority voted to phase out the UK opt-out despite lobbying by business organisations and the UK government.  Instead the Parliament has proposed extending the reference period over which employers calculate average working hours to 52 weeks thus providing some flexibility for seasonal and peak work; the Parliament also voted to remove a 60 hour cap on hours worked in any one week.

2). Pregnant Workers

The key changes are:

• An extension of the duration from 14 to 18 weeks.
• The introduction of the principle of full pay during those 18 weeks although member states remain free to apply their own rates as long as these do not amount to less than sick pay.
• The introduction of the right to request flexible working on return from maternity leave; the employer has a duty to consider the request based on the employee and employers’ needs but is under no obligation to grant it.
• Six weeks’ compulsory maternity leave after the birth of the child but more flexibility in choosing whether to take the other 12 weeks before or after the birth.

3). Small Business Act

The European Commission a Small Business Act for Europe, committing itself and inviting EU member states to ‘think small first’ and put SMEs at the heart of policy making. There are some useful innovations and policy proposals that we support, including:

• The introduction of the ‘think small first’ principle as a guiding objective when making policy
• An SME test to be carried out on all legislative and administrative proposals emerging from the Commission;
• Common commencement dates for regulations and decisions affecting business and the publication of an annual statement of legislation entering into force
• The use of derogations, transition periods and exemptions for small businesses wherever appropriate
• Easier access to information and public procurement opportunities
• Easier access to R&D funding, and in particular the 7th RTD  Framework Programme.
• Support for innovative start-ups and SMEs in the field of eco-innovation
• Incentives for energy efficient businesses and products
• Launch of a Gateway to China scheme to promote European SMEs’ access to the Chinese market by 2010, provided that it builds on and does not duplicate existing business support structures

In addition, the Act includes three legislative proposals:.

• A regulation providing for a European Private Company Statute (SPE).
• A Block Exemption (GBER) of SMEs from European rules on State Aid. This brings together in one single text all the legislative acts on state aid for SMEs.  The regulation will make it easier for SMEs to get state aid and increase the amount they can receive from 7.5% to 10% for medium sized companies and from 15% to 20% for small businesses.
• A directive on reduced VAT rates. This directive will offer member states the option to apply lower rates for labour intensive and locally supplied services (such as catering, hairdressing etc.)

3a). European Company Statute (aka SPE)

As currently drafted, it provides a relatively cheap and simple way of setting up a company that can operate in one or more member states.  It would allow businesses to follow the same company law provisions across all member states and aims to reduce compliance costs arising from the disparities between the 27 national rules on the creation and running of companies.

The proposal does not affect national employment law, tax law, accounting, or insolvency law.  Nor does it deal with the contractual rights and obligations of the SPE or those of its shareholders other than the ones deriving from the articles of association of the SPE.

The new company form would exist alongside the UK private limited company, providing an alternative, not mandatory form.

4). Regulatory Reform

Administrative burdens: the Commission has launched a competition asking businesses to nominate the most burdensome piece of legislation they have to comply with.  They are hoping that this will provide further candidates for ‘burden reduction’

Impact Assessments: Last year’s external evaluation of the Commission’s impact assessment system confirmed BCC research. There is much more to do to improve the quality of impact assessments (for example, only 10% of all IAs carried out since 2003 quantified the cost of proposals to SMEs; while 70% provided no analysis of the impact on SMEs at all).

This has resulted in the SME test for all new legislation that was recently agreed by all member states as part of the Small Business Act.

5). Late Payment

A proposal to update the Late Payment directive is expected in early 2009.  The following are being considered by the European Commission:

• Public authorities would be obliged to pay within 30 days
• The interest rate on late payment would be increased.
• Introduction of a late payment fee for the recovery of administrative costs, as well as a compensation for the internal costs incurred by the late payment.
• A Late Payment penalty ie. a fixed financial penalty of, for example 10% of the outstanding amount with a maximum of, for example, 5,000 euros.  This penalty would be applied on top of interest for late payments.

6). Services Directive

Due to come into force on 1 January 2010, the Services directive is designed to remove barriers to cross border provision of services. By requiring member states to justify any national requirements on service providers on the grounds of public health, security, policy and the environment and to prove that they are necessary, proportionate and non discriminatory. Also by setting up Single Points of Contact where business will be able to find information and complete the formalities necessary to doing business in another member state; and finally by improving cooperation between regulatory and authorisation bodies in all member states.

The success of the directive will now depend on timely and even implementation by all member states.  In true UK civil service fashion, BERR is on course to meet the deadline for implementation although the Single Point of Contact is unlikely to be fully operational for a further year.  The BCC is working closely with BERR throughout the process and is also in discussions with the department with a view to delivering part of the Single Point of Contact. We are also working with Eurochambres to chart progress in each member state and to bring pressure on those that are falling behind.

7). EU RECOVERY PLAN

The European Commission published a €200 billion (1.5% of EU GDP) economic recovery plan. It includes a range of short term measures to restore confidence and boost demand and longer term investments to boost growth.
In practice about €170 bn would be contributed by the 27 member states through tax and infrastructure plans; the European Commission and the EIB would provide the remaining €30 billion.

Measures for member states to consider, according to their particular circumstances, include:

• Forcing banks to lend and to pass on interest rate cuts
• Public spending, focusing on unemployment benefit
• Government guarantees and loans
• Financial incentives for long term challenges like climate change
• Lower taxes or social contributions
• Temporary reductions in VAT

Measures that EC will put in place include:

• Accelerating payments of up to €6.3bn under the structural and social funds
• Mobilising €5 bn for energy interconnections and broadband
• A European green cars initiative with combined funding of €5bn
• A European energy efficient buildings initiative worth €1bn
• A ‘factories for the future’ initiative estimated at €1.2bn
• Implement and build on Small Business Act for SMEs
• Make state aids rules more flexible (so that decision making is speeded up for Lisbon areas eg, innovation.; or member states are given further scope to guarantee loans in specific areas, such as outdoing EU environmental standards)