BUSINESS STANDARDS
is the quarterly magazine of BSI Group, highlighting the vital role that standards play in today's business environment. Regular features include interviews with leading business figures, as well as news on the latest developments in management systems and standards.

Business Standards > Articles

Serving up a new direction

28 May 2008
Topics: Services directive, Customer service, CE mark

The barriers that confront service businesses represent Europe's final commercial frontier. But that's about to change. From December 2009, when the EU's new Services Directive takes full effect, businesses from management consultants to hairdressers, ad agencies to undertakers will be able to trade freely across EU borders.

Services comprise Europe's single biggest commercial sector and the removal of regulatory and administrative barriers has major implications for business. The new directive will put services on an equal footing with goods, which already enjoy unfettered movement within the EU. It's one of the most significant changes to European law in more than a decade.

"This is one of the fundamental rights that is talked about right at the start with the Treaty of Rome," says Claire Neilson-Noble, senior policy adviser with the Confederation of British Industry (CBI). "Services are a vast part of the economy, but at the moment they account for a very small amount of internal trade."

The service sector generates more than two-thirds of European Union GNP and a similar proportion of jobs. But most services are delivered almost exclusively within the originating state and it's estimated that services comprise just one-fifth of cross-border trade.

Historically, legal and regulatory barriers have often made it extremely difficult for businesses - and small businesses in particular - to sell their services beyond their own national boundaries. Examples of restrictions found in some member states include rules on driving schools (no more than one for every 15,000 people), restrictive licensing for tour guides and regulations insisting on a minimum distance between opticians of 350 metres.

Tearing up rules like these - and the European Union has identified more than 90 of them - is likely to create major new opportunities for service businesses of all sizes. But it means that national incumbents could face increased competitive challenges too.

"The UK is quite an open market anyway, it's already got people coming in and opening up businesses," says Neilson-Noble. "There is the possibility of it having some negative impact in the short term. But in the long term, this will generate an increase in the number and diversity of service providers, to the advantage of UK business."

Help already at hand

For businesses expanding into the European arena, existing standards provide valuable guidance on meeting customer expectations. These include the ISO 10000 series of quality management standards, all of which have a specific customer service focus. Among these are BS ISO 10001, which deals with customer satisfaction; BS ISO 10002, which deals with complaint handling; and BS ISO 10003 which focuses on dispute resolution. BS ISO 10004, which is still at the draft stage, will cover the monitoring of customer satisfaction.

Service specification is covered in BS 7373 part 3, while BS 8477 - the first British Standard for customer service - is likely to prove invaluable. Certifiable standards such as ISO 9001 also have the potential to play an important role in delivering assurance for service businesses.

Engendering customer confidence could remain a challenge in the short term, though. For services, there's currently no equivalent of CE marking used on goods traded in the EU, although the idea of a similar scheme for services is not being ruled out in the long term. Free consumer information and assistance with cross-border disputes is already available from the EU-backed European Consumer Centre Network (ECC-Net), but the service suffers from a low level of public recognition.

In the longer term, new pan-European standards dealing with service quality and delivery could play a decisive part in building customer confidence, which is why BSI is working closely with CHESSS, the CEN Horizontal European Service Standardization Strategy. This is an initiative that seeks to identify the most effective role for standards in opening-up the market for service providers.

Critically, the focus is on exploring how standardization can be applied across multiple service sectors, not just specific ones. And there's an emphasis on providing guidance for improvement, rather than telling providers how to run their businesses.

"We are looking at whether there could be four or five core standards that could apply to all services," says BSI's Brian Such, currently working on the CHESSS initiative. "If we can develop a core package of generic standards, with a sector-specific standard to deal with the particular service being delivered, then it could provide the basis for a scheme similar to CE marking."

Once the Services Directive is fully implemented, service providers should find it much easier to establish themselves in other member states. Businesses will be able to provide both temporary and permanent services either locally, or at a distance. Local labour laws will apply in the country in which the service is being provided, so service businesses will not be able to easily exploit wage differentials between member states. The increased competition made possible by the directive is expected to stimulate the EU economy and reduce the cost of services being delivered.

In order to make setting up as easy as possible, all member states will have to provide a designated single point of contact (SPC) offering assistance to businesses. This may be web-based with telephone help-line support. But there is no obligation for member states to provide the SPC in any language other than their own.

"We've lobbied that the UK's single point of contact should be available to both UK and other EU businesses," says the CBI's Neilson-Noble. "But what we also hope to see is that UK businesses find it much easier to move across the EU, to test the waters and open up their businesses so that they've got a much wider market to access."

Obligations for member states include greater regulatory co-operation and a requirement to justify residual or new restrictive regulation. In cases where businesses need to apply for local licences or authorizations, competent authorities (those with a regulatory role) are obliged to process applications within a specified period of time. Failure to do so will mean that authorization will be deemed to have been granted. However, individual states will be able to maintain restrictions where issues such as national security, environmental protection and public health are concerned.

The Services Directive does not cover all businesses and some sectors are excluded. These include telecoms, financial services, transport, audio visual services, healthcare (both public and private), security services (including surveillance and bailiffs) and tourism.

Most service businesses in Europe are small to medium-sized enterprises. Trade barriers, such as restrictive authorization schemes, mean they've often been reluctant to explore cross-border opportunities. More than 70 per cent of the wealth generated in the UK, for example, comes from the service sector, and yet services comprise only about one-third of exports.

"I think the main impact will be on the SME community. It will make doing business less complicated," says Neilson-Noble. "Big businesses already have the ability to do this and will already have the staff in place to help them break down the barriers and move across Europe. But because large businesses have absorbed some of these costs into their business already, there could be cost savings when the barriers are removed."

The commercial implications are, potentially, enormous. According to figures published by consultants Copenhagen Economics, adoption of the Directive could create 600,000 new jobs across the European Union and lead to an increase in total consumption of 0.6 per cent - about ?37bn - although the organization thinks these figures may be on the low side. It's believed that full implementation of the new legislation will create more than 80,000 new jobs in the UK.

In a sector as segmented and extensive as service provision, forecasting is a notoriously tricky business. And it's hard to predict how quickly any economic benefits will be captured.

"I think the gains will be much more in the long term," Neilson-Noble points out. "The UK is claiming that it could generate between £4-6 billion per year for the UK economy but I think this depends on how well the directive is implemented. "How much business in Europe picks up on it - and whether it becomes easier to move across Europe - is the real litmus test. Therefore, robust and consistent implementation is vital," she adds.

For more information on the Services Directive, visit: www.berr.gov.uk/europeandtrade/Europe/services-directive

>>CASE STUDY: EU Directives - the New Approach

"New Approach" directives apply to products rather than services, but all of them are underpinned by a regulatory philosophy that's intended to make life easier for businesses - and legislators.

New Approach directives - for example, those covering construction products and medical devices - contain "essential requirements" that must be met in order for manufacturers or importers to be able to sell their products in the European Economic Area (EEA). The directives themselves offer no detailed guidance on compliance - standards do that instead.

Products that fall under one or more New Approach directives must earn CE marking before they can be sold. And if a directive requires that a product is independently tested, certified or inspected, the assessment must be carried out by a Notified Body.

The main role of a Notified Body is to make sure that the manufacturer meets the essential requirements of the relevant New Approach directive. CE marking is awarded on the basis of successful conformity. Independent certification provides valuable reassurance and helps businesses to claim a defence of due diligence if anything goes wrong. BSI Product Services offers one of the world's most comprehensive certification services. It is a Notified Body for 17 European Union directives, from construction products to medical devices and from lifts to gas appliances.

Despite its name, the "New Approach" concept is a relative veteran by European Union standards. The term was coined in 1985 and it reflected the then new idea of offering industry a greater choice on how to meet public obligations. It has traditionally applied only to products, but as the demand for more flexible approaches increases - and as services have become increasingly important - that could change.

"The emergence of services as a dominant part of the economic life of many European countries is comparatively recent," points out BSI's Brian Such. "There is no reason at all why the New Approach Directive shouldn't be extended to services, and there are a lot of people who are recommending it should be."

For more information: www.bsigroup.com/may08directives

>>CASE STUDY: EU Directives with standards-related activities

Reference <> Subject of Directive

90/396/EEC <> Appliances burning gaseous fuels

00/9/EC <> Cableway installations designed to carry persons

89/106/EEC <> Construction products

2004/108/EC <> Electromagnetic compatibility

94/9/EC <> Equipment and protective systems in potentially explosive atmospheres

93/15/EEC <> Explosives for civil uses

95/16/EC <> Lifts

2006/95/EC <> Low voltage equipment

98/37/EC <> Machinery safety

2004/22/EEC <> Measuring instruments

90/385/EEC <> Medical devices: Active implantable

93/42/EEC <> Medical devices: General

98/79/EC <> Medical devices: In vitro diagnostic

92/42/EEC <> New hot-water boilers fired with liquid or gaseous fluids (efficiency requirements)

90/384/EEC <> Non-automatic weighing instruments

94/62/EC <> Packaging and packaging waste

89/686/EEC <> Personal protective equipment

97/23/EC <> Pressure equipment

99/5/EC <> Radio and telecommunications terminal equipment

94/25/EC <> Recreational craft

87/404/EEC <> Simple pressure vessels

88/378/EEC <> Toys safety

Business Standards © 2008. Editorial produced by Caspian Publishing in association with the British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.

We are under increasing pressure to comply with a growing number of regulations and to maintain growth - while under greater scrutiny than ever before. How can this be good for business?

We are all in the risk management business. In the current climate, as consumers we are encouraged to claim compensation or sue for damages for almost any negative incident we encounter.

Read more

Have a standards-related question for BSI or a comment on the website? We'll find the right person to answer.