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Print articleBusiness Services
Innovating business related services
The services sector of the economy accounts for around 73% of UK GDP. The position is similar in the European Union, which has recognised the vital role that business-related services play in the economy and has acknowledged their importance to the overall competitiveness of the European economy. Business-related services¹ constitute the largest sector of the EU economy employing around 55 million people in 2000.
| The UK is in the lead in respect of financial and insurance services |
The sector in the UK and across Europe stretches from high valueadded services (such as professional and ICT) to business support services as shown in Chart 1². Its inter-relationship with other sectors of the economy is complex, as is well illustrated in the chart drawn up by DG Enterprise as part of their work in this area (Chart 2³).
Business-related services is a major subsector accounting for business-to-business and business-to government services. Recent research by DG Markt and Services highlights the value added to the economy by these services. Chart 3 4 shows the role of business-related services in intra- EU service trade in 2001 (the most recent statistics available), while chart 4 from the same source shows trade openness in business-related services in that year. From this we can see that the UK is in the lead in respect of financial and insurance services but trails the Netherlands in relation to other relevant services. Overall, it is still way out in the lead compared to other members of the EU.
The business-related services? sector has been a major source of both new jobs and new businesses in the EU, covering a wide range of economic activities. More than two-thirds of all new enterprises start up within the area of business-related services, but this in turn leads to a need for better skills, greater use of ICTs and more innovation to drive the sector forward.
| There is no reason why UK companies should not retain a market predominance or high market share |
Before looking at the UK scene in detail, it may be useful to highlight the recent findings of the European Forum on Business Related Services set up by DG Enterprise which was transferred to DG Markt and Services at the end of last year. The Forum was established on 1 April 2004 as a follow-up to the Communication on ?The competitiveness of businessrelated services and their contribution to the performance of European enterprises? (COM (2003) 747). The Forum Report published in June 2005 concludes that:
- Market integration and competition in business-related services markets is not vigorous enough to ensure and strengthen their competitiveness;
- The inputs necessary for production (labour qualifications, integration of ICT and capital) are lacking in quality and quantity;
- The outputs from the businessrelated services? enterprises are not sufficiently transparent (standards), valued (reporting on intangible assets) or documented (quality);
- The provision and use of businessrelated services is limited in lessdeveloped regions and candidate countries, mainly affecting SMEs and convergence process;
- Knowledge about the sector and the markets is scarce, hampering the decision making of enterprises and policymakers.
These conclusions, together with the Commission?s proposal to follow them up with an Action Plan of non-legislative measures and to develop this in close collaboration with stakeholders were endorsed by the Competitiveness Council in the Conclusions of the meeting on 11 March 2005. (The writer is a member of the Forum and the only UK national on it).
Further action will include:
- Non-legislative actions of a services-specific character, filling a gap which is not already covered by other Community policies, or complementing them when they have not yet been applied to a sufficient degree;
- The creation of Europe-wide (CEN) standards, voluntarily agreed between stakeholders;
- Promotion of information about the business-related services? sector including the development of services statistics and economic and statistical analysis.
The UK compares well to most other European countries in these areas but the challenges, both internal and external, are still great. Across all parts of the sector innovation is necessary if companies are to keep up with the desires and expectations of clients. At the lowest level, cleaning and catering services need to develop new competencies and delivery methods if companies supplying these services are to remain in the market; facilities management has to respond to the increasing sophistication of clients; PFI and PPP contracts require the highest level of innovation and adaptability from operating consortia if public service are to be modernised; and ICT and professional services have to rise to the challenge of increasingly complicated requirements and contractual forms respectively. This is as true at the SME level as it is for FTSE 100 companies.
Companies cannot deliver highquality value-added services without staff who are appropriately qualified and suitably motivated to assist in that service delivery. This can be difficult to grasp, especially where wage costs are low and margins are tight but this is where the ?what goes round, comes round? principle points to the revolving benefit of all companies becoming involved in training and development. Large European and international suppliers of services rely on subcontractors and specialist contractors to have these high levels of competence to enable the whole contract to proceed successfully and, thankfully, on the whole it is achieved.
| Companies cannot deliver high-quality value-added services without staff who are appropriately qualified |
It is interesting also to view the increasing involvement of non-British companies in the UK market where they add value to our market and export value to other markets within the EU and worldwide. This permits our market-leading competencies and methodologies to be exported and to assist in the development of new markets for which UK companies can compete with other national companies. Further, it is exciting to note the number of multinational contracts which are being awarded to UK-based companies for the provision of a wide variety of services because of their accepted predominance in the field. This is particularly evident in property and facilities management where international groups are awarding contracts to UK-based companies for a wide rage of service provision.
Nowhere has this been more evident than in the recent development of offshoring of call centres and technical back-office functions. Starting with UK companies harnessing local expertise this has developed into a burgeoning national market in which national companies can begin to compete with foreign providers in this potentially lucrative arena which has the possibility to become the largest facilities management market in the world within the next 10 years.
One of the missing pieces in this jigsaw, particularly within the EU, is the mutual recognition of qualifications. This has bedevilled the EU from its conception and the goal remains as elusive as it was then. Posted workers are frequently required to requalify to satisfy national or local requirements. Of course, there will be national or local criteria which will need to be satisfied but these are not usually onerous. More (and often unduly) onerous are the requirements to comply with the tightly drawn requirements and local barriers to entry (such as licences, indemnity insurance, obligatory membership of trade and professional associations) demanded by local Chambers of Commerce in other EU countries or the refusal of national professions to recognise the qualifications of foreign nationals without rigorous national compliance before allowing them to practice. Here the UK leads the way and benefits from it. The multicultural nature of our workforce not just in relation to UK citizens but also other EU nationals who wish to work in the UK and other foreign nationals who fill skills gaps is fundamental to our success and to the ability to export best practice and ground-breaking ideas to other countries.
In short, new challenges are arising in the new abilities of foreign national companies to challenge UK ones in the same national and international markets. These are positive developments which help in the development of local, national, EU and international markets. There is no reason why UK companies should not retain a market predominance or high market share in these markets and continue to increase the competitiveness of the UK economy within the EU and worldwide.
Contact: Norman Rose
Director-General
Business Services Association
Warnford Court
29 Throgmorton Street
London EC2N 2AT
Tel: +44 (0) 20 7786 6300
Website: www.bsa-org.com
(Footnotes)
1 Business-related services are defined in
accordance with the following sectors in statistical
terms (NACE)
? Business services (NACE 70-74)
? Distributive trades (NACE 50-52)
? Network services (NACE 40, 41, 60-64)
? Financial services (NACE 65-67)
2 KPMG 2005
3 DG Enterprise, EC 2004
4 CPB for Forum for BRS, May 2005