The European Parliament has voted to open up the EU services sector to cross-border competition.
MEPs approved the services directive, but only after watering it down to protect jobs in richer member states.
They rejected the ‘country-of-origin principle’ that would have enabled companies to provide services abroad under the regulations of their home country.
European trade unions said this would have allowed companies based in countries with weak regulations and low standards of health and safety to undercut rivals in countries with higher standards.
But business groups have condemned the tactics of the trade union movement in making these claims to polarise the debate and block important parts of the directive.
David Frost, director-general of the British Chambers of Commerce said: “We are disappointed that the directive has been watered down – largely down to scaremongering by some trade unions. The country-of-origin principle, coupled with the protections provided by the [European] Parliament, would have led to more growth and more quality jobs.”
And Miles Templeman, director-general of the Intitute of Directors in the UK, said: “Although we would have preferred a more ambitious directive, we are determined to make the best of the positive measures approved by the European Parliament.”
The directive will now be discussed by member states at a summit in March.