Tue. Oct 4th, 2022

Brussels, 19 September 2022

The pandemic has shown us how much SMEs were exposed to disruptions across supply chains and the ensuing solvency issues.

We must also put SMEs at the centre of our focus for all policies we design in more “regular” times – times that are tough but do not qualify as a crisis. Our competitiveness depends on it.

Our roughly 25 million European SMEs employ almost 100 million people and are the backbone of our industry and economy. This employment is essential, and SMEs have always put their employees first – even and especially in times of crisis.

For Europe to recover, SMEs need to recover.

After suffering the consequences of the COVID crisis, SMEs are now particularly affected by soaring energy prices, inflation, and supply chain bottlenecks.

That is why Commission President Ursula von der Leyen was spot on in offering our SMEs a lifeline by announcing in her 2022 State of the European Union address that the Commission will put forward an SME “Relief Package”.

Europe has not stood by idly, offering advice and support to SMEs as they, too, are embarking in the twin green and digital transition.

But we need to do more.

I believe that the SME Relief Package should deliver much-needed support in at least three key areas.

1.     Combating late payments once and for all

First, secure cash flow.

Late payments threaten the survival of SMEs. And yet, with the pandemic and now spiralling energy and raw materials costs, the number of invoices paid late increases markedly.

The EU Late Payment Directive, which has been in place for over a decade, is not fit for the challenge.

Despite this legislation, less than 40% of payments in the EU – be they by public authorities or businesses – are made within the contractual deadline.

Late payments put the liquidity of SMEs, and sometimes their existence, at risk. 1 out of 4 bankruptcies are due to invoices not being paid on time. And late payments prevent SMEs from investing in their sustainability and green performance and hiring more employees.

We cannot accept this situation any longer.

We will revise the Late Payment Directive to provide SMEs with a modern and strong legal framework. A European standard on responsible business conduct across the Single Market.

A stronger framework could – for example – look into setting caps for B2B payments, as we do for the public sector, stronger enforcement with sanctions and monitoring obligations, providing SMEs with effective dispute resolution and mediation tools, preventing abuses and unfair practices.

Transparency on payment discipline is critical. It could build on the Observatory on Late payments, and its pilot in the construction ecosystem, to closely monitor payment performance across industrial ecosystems with regular data.

I also want to explore how digital tools could allow creditors to get paid as soon as an invoice is issued.

2.     Making it easier to do business in the Single Market

Second, simplify.

Administrative burden remains a major issue for SMEs. One striking figure: on average, where a big company spends €1 per employee to comply with a regulatory duty, a medium-sized enterprise spends around €4 and a small business up to €10.

Entrepreneurs need legislation that is clear, easy to implement, and avoids disproportionate costs. We have committed ourselves to removing red tape and lowering costs without compromising our policy objectives. Better regulation remains a key priority for the Commission, and I will strengthen our work on reviewing legislation with the ‘fit for future’ platform and on filtering initiatives regarding their relevance for SMEs.

The President announced, as part of the SME Relief Package, a proposal for a single set of tax rules for doing business in Europe, called BEFIT. I fully support this proposal prepared by my colleague Paolo Gentiloni, which will have a profound effect on the ability of SMEs to do business in the EU. It will provide one single rulebook to cut red tape, reduce compliance costs and boost EU jobs and investment.

Much potential lies also in harnessing the power of digital and data for SMEs. For example, the Single Digital Gateway — a network of national portals, accessible via the Your Europe portal, for EU citizens and businesses — has to be SME-friendly.

SMEs need easy online access to information, procedures and assistance services regarding all their queries linked to doing business across borders, including advice on public procurement and sources of funding.  A lot of time could be saved if businesses are asked to supply data only once to a public administration, for example through the Gateway.

Our efforts to provide SMEs with an enabling business environment should also aim to facilitate access to finance and to a workforce with the right skills.

3.     Facilitating access to finance and skills

Third, to invest and grow.

The Recovery and Resilience Facility makes unprecedented levels of funding available for greening, digitalisation, and upskilling in SMEs. €44 billion of measures to support SMEs directly in 22 national plans. And SMEs can benefit from broader measures worth €109 billion euros, such as loans or equity support open to all companies. Now we need to make sure that this money reaches SMEs on the ground.

InvestEU will help SMEs access loans and equity. It aims to mobilise over €370 billion in investment. We build on the success of EFSI where over 1.4 million SMEs benefitted from investment projects. It will also include guarantees for Solvency Support to tackle solvency risks and also support SMEs that are going public or intend to do so. This will attract additional private investments to help SMEs scale-up and grow. I am happy to announce that the call under the SME window of InvestEU has been oversubscribed. This means that the support it provides is tangible to economic actors.

But we need to be vigilant.

Access to finance is expected to tighten. According to the latest ECB survey on the access to finance of enterprises, businesses felt that changes in the general economic outlook had a strong negative impact on their access to finance (-29%, down from 8% in 2021).

I think we should explore gaps and obstacles in SME funding in the current environment, including looking at demand tools like public procurement. This can include contributing to a design of a new European Sovereignty Fund that the President announced to make sure the future of industry — and thus of our SMEs — is made in Europe.

Finally, SMEs are increasingly challenged by a lack of skilled employees. They often do not have the same resources as large companies to compete for and invest in the training of their employees. I think there is space to see how our tools — such as the Pact for skills, digital crash courses, digital volunteers and others — could further help SMEs hire, train and keep skilled workforce.