Europe is 'shutting out UK firms'

Gordon Brown will take the findings to EU finance ministers

EU countries discriminate against UK firms in favour of home-based companies when awarding contracts, according to a report commissioned by the Treasury.

The review, ordered by Chancellor Gordon Brown, claims British firms are unfairly shut out of a market worth about £1,000bn.

It contains examples of contracts going to national suppliers even when British firms had made cheaper bids.

Mr Brown will raise the findings with EU finance ministers on Tuesday.

What we must do is expose the fact that not enough has been done to open up these markets for public purchasing Gordon Brown

BBC economics correspondent Hugh Pym said the report supported a view long held by British business leaders that they faced an uneven playing field in Europe.

According to The Times, other examples of unfair practices the report uncovered included:

• contracts being drawn up to favour a national supplier
• pressure being placed on suppliers to use local sub-contractors
• seeking foreign bids purely to force local suppliers to drop their prices

Interpretation of rules

Mr Brown will use the report to push for reform in Brussels on Tuesday.

He told the BBC: "I'm hoping we'll get a series of market investigations [and] that the Commission will clamp down on this practice."

Speaking to Radio 4's Today programme, he said that contracts were on average 30% cheaper when awarded on an open basis.

"What we must do is expose the fact that not enough has been done to open up these markets for public purchasing," he said.

There's a widespread perception amongst British industry that we're not getting a fair crack of the whip Alan Wood, report author

"It is about the interpretation of the rules, not mainly by illegality, but by interpretation of the rules in a particular way that countries avoid their responsibilities under the single market."

The report singled out France and Spain as countries who had taken advantage.

Mr Brown will call on the EU to conduct market investigations, similar to the UK's Office of Fair Trading, to probe areas where allocations of contracts are not working properly or fairly.

"They should make sure that small and medium sized firms can get access to these contracts and it is not just the big firms."

He will also call on the EU to clamp down on state aid.

'Barriers in way'

The report's author Alan Wood, chief executive of the UK arm of German company Siemens, told The Times: "There is significant evidence that many of the benefits of competition in public procurement across the EU remain untapped. This must change.

"We found a fairly consistent picture of British firms finding barriers and difficulties in their way."

He told the BBC: "There's a widespread perception amongst British industry that we're not getting a fair crack of the whip."

He did not conclude that rules had been broken, but rather they were interpreted in a way which worked against British commercial interests.

The companies which gave evidence to Mr Wood did so confidentially, the newspaper reported.