By "legally work" do you mean "pay taxes"? Because AFAIK European people can legally work in UK and live or pay taxes in their origin countries (France, Germany, Spain, etc)
It's tricky. The hiring pool can technically include the whole EU, but people need to live in the UK while they work here (I believe). We can't hire someone in Germany and have them be employed in the UK.
> people need to live in the UK while they work here
Not really. The only issue is where the employee wants to pay taxes (and get social benefits), in the UK or in the country of residence. This also applies for UK nationals living abroad in Europe.
Generally you're forced to pay local taxes when you spend 183+ days living in the same country (you automatically get resident status), but most of the EU countries have bilateral income tax agreements in order to prevent double-taxation. (you can live in Spain and request tax exemption/return from the UK or Spain gov) and viceversa.
It's trickier than simply hiring EU contractors but it's definitely doable (I know some cases) and opens a whole new talent pool for an UK company.
http://europa.eu/youreurope/citizens/work/work-abroad/index_...