In the context of the 2021 SME Assembly, EBC took part in the panel discussion titled “Tackling Late Payment: Construction Ecosystem at the Core of the Issue”, organised by the European Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW). The SME Assembly, the most significant yearly event bringing together actors from small and medium-sized enterprises in Europe, successfully took place during the European SME week from 15 to 17 November. This year, the SME Assembly was a hybrid event, with its epicentre in Portorož, Slovenia and simultaneous online activity hosted on a bespoke platform.
The theme of the session was focussed on the challenges facing SMEs due to late payment across the EU, with a focus on the learnings from the construction sector. Participants included Ms. Antonella Correra, Policy Officer at DG GROW who moderated the session, Ms. Nina Stražišar from the Slovenian Finance Ministry, Mr. Karim Karaki, Senior Advisor at PwC, Ms. Lasse Hamilton Heidemann, Senior Director at Dansk Erhverv, and Mr. Spyros Mathioudakis, Policy Officer at EBC.
Ms. Correra provided an outline of the problem, noting that half of SMEs in the EU are not paid on time and in most of those cases the payment exceeds 60 days. This has severe repercussions on cash flow and increases the risk of bankruptcy – in the construction sector one third of bankruptcies are due to late payment. The European Commission has been working with Member states and business organisations across the EU to monitor payment practices and find solutions to poor payment practices, including by setting up an EU Observatory of payments in commercial transactions.
By presenting the work done by the consultancy firm PwC under request of the Commission, Mr. Karaki provided an overview of the envisioned functioning of the EU Observatory which is based on the previous experience from the construction sector (see European Construction Sector Observatory ECSO) and how this can be extended progressively to other sectors. EBC had contributed to the relevant study conducted by the European Commission this summer, placing the construction sector at the heart of the matter.
Mr. Mathioudakis took the opportunity to present EBC’s position, emphasising the need for a zero-tolerance approach regarding late payment, a lasting phenomenon that skews the internal market and considerably impacts construction SMEs. In particular, he presented tangible examples of how the Late Payment Directive is circumvented in business to business (B2B) and public administration to business (PA2B) relations, including the abuse of the controversial and ambiguous concept of “grossly unfair”, pay-if-paid clauses and arbitrary discounts. He also provided concrete suggestions that can help improve the situation, including the need to set an obligatory maximum period of payment not exceeding 30 calendar days for all commercial transactions and the need to make the application of interest a legal obligation from the first day of late payment.
As per the next steps, the European Commission is expected to present its work on the EU Observatory of late payment in 2022, while also examining adopting further soft-law measures with the hope to improve the current situation (e.g., improved framework for mediation).
|To read the EBC position paper on Late payment, click here|
|ECSO recently published an Analytical report titled “Indicators on late payment in the construction sector”, to read the report click here|