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Brussels, 9 April 2014
High Level Group on Business Services: frequently asked questions
1. What are business services?
Business services are services where one business supports another in the execution of its activities. They are also known as “business to business” activities.
Typical examples of business services are: professional services such as management consultancies or legal services; technical services such as design, engineering or technical maintenance services; and operational services such as recruitment, security and industrial services.
2. Why is the Commission active in the field of business services?
The global business services market is estimated at more than €3.5 trillion and is believed to have doubled in size in the last decade. In Europe, business services account for 11.7% of GDP and 12% of employment (1 in 8 jobs in Europe is in business services).
Furthermore, since 1999, business services have been growing more than twice as fast (2.4% yearly average growth rate) as the average of all other EU sectors (1.1%). The numbers are even more impressive when looking at employment: employment in business services grew at a yearly rate of 3.5%, compared to 0.8% on average for all other sectors of the EU economy.
Taking into account the importance of business services for the competitiveness of the economy, their diversity and overall impact on the way we produce and consume, the Commission sees business services as a key sector for fulfilling Europe's growth and jobs Agenda.
3. Why are business services relevant for an industrial renaissance?
Probably one of the most important new business developments is the way the interaction between services and industry is changing. To some extent it is a trend which has been going on for years with, for example, increased outsourcing by industrial firms of certain “non-core” functions. One example of this development is what is sometimes called the “servitization” of industry. This means that industrial firms enhance their product with services. An example of such a company is Caterpillar, which offers a through-life support service for its equipment and power systems. This involves, for example, remote monitoring technologies to track the state of equipment and predict when maintenance is needed. Such a service could not be offered without powerful ICT systems. However, more interesting from an industrial policy perspective is the way it is transforming the business of Caterpillar from selling equipment to a business of providing solutions guaranteeing a certain level of performance. It is also interesting that this changes its relationships with dealers and clients typically into more long-term partnerships, which again poses new challenges in terms of how to manage such partnerships. Other industrial firms have modernised their business models in a similar way.
As a result of these trends it actually makes less sense to speak about industry vs. services. The distinction was always a bit artificial, but the distinction between industry and services is now becoming more and more blurred. For policy makers at national and EU level these trends lead to certain considerations. An obvious one is how to better formulate policies which simultaneously target both industry and services as a whole. Therefore, it is important that this was a joint initiative of Vice-President of the European Commission responsible for Industry and Entrepreneurship, Antonio Tajani, and European Commissioner for Internal Market and Services, Michel Barnier.
4. Why did the Commission set up a High Level Group for business services?
The Commission believes that business services in Europe have a significant untapped growth potential, especially in terms of productivity and innovation uptake. This is for example clear when making a comparison with the US, where the productivity performance of business services has been better than in the EU over the last decade.
The mandate of the High Level Group was to provide a new impetus to policy development in this important sector and help policy makers better understand the current challenges in the sector.
5. Why was the Group composed of representatives of only four Business Services sectors?
Business services encompass a broad range of sectors from technical services, such as engineering and architectural services; computer services; to professional services such as legal, employment services and facility management. Setting up a group that would have encompassed representatives from all sub-sectors of business services would have been difficult.
Although the High Level Group was composed of representatives of only four sectors (private security, technical and engineering, marketing and advertising, industrial design), its work and the recommendations that have been formulated are horizontal in nature and relevant for all business services.
6. What are the main findings of the High Level Group?
The High Level Group analysed the main trends that have an impact on business services in Europe, such as:
Technology, especially the digital revolution, is changing the way business services are designed (new business models) or provided to customers;
Manufacturers do not offer products, but incorporate products and services together in order to offer solutions to consumers;
Open innovation, combined with customer engagement, leads to networks of companies that pool their resources together to offer custom-made services to their clients;
The significant growth potential of business services is not only limited to the Single Market. Business services in the BRIC countries have been growing steadily over the past decade and European companies should aim at benefiting from this global market opportunity.
The Group identified several barriers that affect the growth of business services in Europe, such as: administrative barriers at national level; ageing infrastructure; skills shortages; public procurement focusing on lowest prices; fragmented representation of business services interests to policy makers.
7. What are the recommendations of the Group?
The High Level Group proposes six policy actions on which it has focused its recommendations for the Commission:
a. Europe 2020 Strategy
Adequately reflect the importance of Business Services in the Europe 2020 Strategy
Increase efforts to engage firms involved in business services in the Horizon 2020 programme
b. Seize the international opportunity
Pay particular attention to Business Services in international trade negotiations and ensure that business services markets in third countries are open to European service providers, including for services being offered by manufacturing firms.
Focus, in partnership with business, on identifying the key barriers to international trade in Business Services.
c. Complete the Single Market for business services
Ensure closer integration of European industrial and services policies.
Build on the existing Points of Single Contact and put forward legislation that would set a regulatory framework for the Member States to create true universal business portals.
Make proposals to optimise the regulatory framework and standards conditions for Business Services, such as for: excessive bureaucracy and fragmented legislation (which could be tackled by a mutual recognition principle enshrined in European legislation); barriers to entry (especially for SMEs) and taxation and insurance regimes that inhibit cross-border trade.
Encourage the creation of European rather than national service standards (where appropriate), as well as promote best practice use of standards.
d. Focus on public procurement
Ensure, together with Member States, the implementation of the new procurement directives, focusing on outcomes, value for society, quality and innovation, rather than lowest cost.
Ensure that the best use is made of sources of business support and advice in Member States, including the collection of best practices on public procurement and promotion of relevant standards and common practices and rules across countries in order to reduce barriers to cross-border trade.
Continue to develop support for SMEs to increase their participation in public and private tenders.
e. Create the technological infrastructure for future business services
Create a flagship programme of common European interest that brings together manufacturing and services firms across Europe to create a shared, single, open platform that will enable open sharing of the data and information that facilitates innovation and productivity gains in Business Services throughout the EU.
Work with Member States to promote the use of open data, especially public data, across Europe.
Develop mechanisms to promote accessibility and standardisation of data.
f. Develop and up-skill the workforce
Within the European skills strategy pay particular attention to Business Services - with a special focus on building the balance of technological, commercial and entrepreneurial skills required to grow Business Services.
Provide support for eLeader programmes designed for Business Service firms.
In addition to the recommendations for the Commission, the High Level Group has issued recommendations for the Member States of the European Union and the industry.
A full list of the recommendations of the Group can be found in the Annex.
8. What will the follow-up to the High Level Group be?
The Commission will analyse the proposed recommendations and decide on the best options it has to address them in the future. The Commission intends to continue its dialogue with all relevant stakeholders in order to implement the recommendations and ensure the right framework for the competitiveness of European business services.
For more information:
ANNEX: Recommendations of the High level Group on Business Services
1. Recommendations for the European Commission
2. Recommendations for the Member States
3. Recommendations for industry
Image of Business Services: Many of those consulted raised the question of image, but the High Level Group felt that this was something best addressed by Business Services firms themselves, rather than an issue for policy. A key message to communicate is that Business Services offer a rewarding and valuable career path, particularly with the shift to high tech, high value services.
Innovation and skills in Business Services (particularly given developments with web 4.0 and the industrial internet): The High Level Group thought it's important that industry took the lead in reskilling the existing workforce so they were able to capitalize on the productivity and innovation potential that modern Business Services offer.
Business Services fragmentation: this a challenge that is becoming greater as increasing numbers of manufacturing firms, for example, are now entering the Business Services domain. Firms involved in Business Services need to co-ordinate their efforts to engage with Member States and the Commission, perhaps through a European partnership for Business Services supported by the Commission.