EU costs Britain dear, warns Brown

A "Jobs for the boys" culture at the heart of the European Union is costing British firms billions in lost business, a Treasury report claims today.

The damning report reveals that other European countries are rigging the rules to ensure domestic firms win lucrative public works contracts.

Chancellor Gordon Brown will seize on the findings to demand widespread reforms to the single market at a meeting in Brussels tomorrow.

The report by Alan Wood, chief executive of Siemens, says the unfair practices of some EU governments was excluding British firms from competing in the £1,000 billion European public works market. It found contracts for schemes such as road building went to domestic firms even though British companies offered more competitive bids.

In other instances, the rules were rigged to ensure that overseas firms had no chance of winning the work.

"There's a widespread perception among UK industry that we are not getting a fair crack of the whip," said Mr Wood. "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 added.

Mr Wood said a frequent problem was "false tendering" where overseas firms are invited to bid for a contract simply to drive down the price of a domestic supplier.

Writing in The Times, Mr Brown said the awarding of government contracts is being held back in many EU states. This was "penalising enterprise and innovative companies," he said. "People right across Europe will want to know why their governments are paying over the odds for services and equipment simply because they have refused to open up their markets and promote competition to achieve better value for money," he added.

Mr Brown said he would also use tomorrow's meeting of European finance ministers to challenge the misuse of state aide to support failing firms.

He said the expensive system is creating market distortions and is in urgent need of reform. Britain pays less state aid than any of the other EU states. By contrast France has given 2.2 billion euros to the manufacturing giant Alsthom and Germany has given 3.5 billion euros to its coal industry.