From left to right: Keka Torres-de Paz, Deputy Director of the Delegation, Raúl Merchán and Bonifacio García Porras, technician and Head of SME Unit of DG GROW, Pilar Ruiz Huélamo, Director of the Delegation, Cristina López García, responsible for European Market Affairs, Cristina Domínguez Beaute, technician of the Canary Islands Regional Office and María Ivorra Ruíz, technician of the Delegation.
Brussels, 20/10/2023.- The Delegation of the Chamber of Spain to the European Union (EU) organised a new Training Seminar entitled “Proposal for a regulation on late payment: moving forward in the culture of punctual payment”. The event was attended by the Head of the SME Unit, the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) of the European Commission (EC), Bonifacio García Porras.
SMEs account for 99 % of all European companies, generate around 56 % of EU GDP and provide two thirds of jobs in the private sector. In addition, they are essential for the innovation sector, as a large percentage of start-ups introduce fundamental measures for the twin transition. However, in recent years, SMEs have faced multiple challenges that have endangered the European economy and society.
Payment delays are the second concern of European SMEs, behind administrative burdens. Every year in Europe, one in four SMEs goes bankrupt pending payment, losing jobs and the competitiveness of the EU is negatively affected. And here lies the importance of the proposal that the EC is presenting to us today – Pilar Ruiz Huélamo, Director of the Delegation.
On 12 September, the European Commission presented an aid package for SMEs (COM(2023) 535) and a proposal for a Regulation on combating late payment in commercial transactions (COM (2023) 533). Both texts took into account the contributions received from business associations, businesses, public administrations and citizens during the public consultation.
The SME Support Package sets out three general objectives: help SMEs in the short term, increase European competitiveness and build a situation that is fair and fair. To achieve these objectives, four policy axes are established:
- AXIS 1. Create a new regulatory framework that paves the way for SME activity.
- AXIS 2. Improve liquidity and access to finance.
- AXIS 3. Allow access to qualified personnel.
- AXIS 4. Support SMEs throughout their life cycle.
One of the most important measures to make things easier for SMEs is the creation of a representative who has a significant role in legislating aspects that directly affect them, “Mister SME” – Bonifacio García Porras, Head of Unit A2 of DG Grow.
Every year around 18.000 million invoices are issued in the EU, more than 500 every second. Reliable payment flows are needed to make the EU economy, especially SMEs, more competitive.
Goods and services are often supplied through deferred payments: the supplier (the creditor) grants the customer (the debtor) a payment period to pay the invoice (commercial credit), once the goods have been delivered or the service agreed in the contract has been provided. Late payment is default after the agreed or legal period. They affect businesses in all sectors and all Member States, and disproportionately affect SMEs.
With the aim of eradicating or mitigating this situation, the Proposal for a Regulation on combating late payment in commercial transactions includes, inter alia, the following measures:
- Maximum period of payment of invoices of 30 days before which there is no agreement to the contrary.
- Obligation of default interest accrued automatically until full payment of the debt.
- Nullity of the clauses designed to extend the maximum payment period and of the clauses seeking to abolish the payment of default interest.
- Establishment of a European Payments Observatory to monitor homogeneous compliance with the Regulation. In addition, the European Commission will have to draw up a report on its implementation after 4 years.
- Reversing the increased burden of proof on public administrations during their procurement processes, e.g. the public contracting authority must demonstrate that payments have been made on time (Article 4 of the Proposal).
- Possibility to use an Alternative Dispute Resolution (ADR) system.
The aim of the Regulation is to strengthen the liquidity of SMEs and to combat late payment. It is part of EJE 2 of the SME support package. To do this, it shortens the maximum payment period in transactions between companies (B2B) and between public administrations and companies (G2B) to 30 days and establishes a system of guarantees with more effective default interest - Bonifacio García Porras, head of unit A2: SMEs of DG GROW.
The EC expects at least 30 % of EU SMEs to benefit directly from this provision. Combining the limitation of payment deadlines with dissuasive measures should reduce the number of invoices paid late and significantly reduce the costs associated with the time spent. The number of person-days per year that a company spends pursuing late payment has been estimated to range from five days in Germany to more than fifteen in Spain. This new legislation foresees a total annual saving of 27.4 million person-hours to the EU economy, equivalent to EUR 5,845 million.
The debate revolved around the new payment deadlines for the Territorial Chambers of Commerce and whether these would affect the management of grants; access to European aid to digitise collection systems; the exceptional nature of perishable products or the grouping of invoices.
The Delegation to the EU referred to the report of the Chamber of Spain on the new legislative proposal to combat late payments.
Late payments pose a major problem for companies’ financing, which in turn is an impediment to sustainability, digitalisation, internationalisation and investment. In addition, the average payment period in Spain is above 80 days, reflecting a truly worrying situation. – Pilar Ruíz Huélamo, Director of the Delegation.
Together with companies, the seminar was attended by the Territorial Chambers of Commerce of Badajoz, Menorca, Murcia, Santiago de Compostela, Valladolid and Zaragoza.
If approved, this proposal will repeal the current 2011/7/EU Late Payment Directive. Although the Regulations are mandatory since their publication, the current proposal sets out a number of obligations for Member States (such as the appointment of implementing bodies, mediation bodies or the obligation to provide training to companies) and grants a year for their full implementation.