SME support: right focus and ambition in the Commission President’s State of the Union speech

On 14 September, in her State of the Union address to the European Parliament, European Commission President Ursula von der Leyen outlined the Commission’s priorities for the coming period. Among the central elements of the speech featured the emergency measures that the Commission is proposing following the crisis stemming from the war in Ukraine, with specific support measures for SMEs. These measures include the long-awaited revision of the Late Payment Directive, a step that EBC has insisted on enormously.

The energy crisis was the first focus of the speech, with the introduction of revenue caps for electricity producers so that 140 billion revenues are used to support businesses and households. To allow such support, the EU envisages to extend and prolong the State aid crisis framework. This initiative is welcomed as a first positive move towards allowing small companies to keep their activity afloat.

The second focus of the SOTEU was directly on SMEs. President von der Leyen announced an “SME Relief Package”. She noted that the EU must remove the obstacles that still hold small companies back, as they are the backbone of Europe’s long history of industrial progress. The President recognized that inflation and uncertainty are weighing especially hard on them, reason why the Commission is putting forward a specific package to help them cope with the ongoing energy crisis. 

The President also listed two concrete actions:

  • The revision of the Late Payments Directive: The President underlined that “we will revise the Late Payment Directive – because it is simply not fair that 1 in 4 bankruptcies are due to invoices not being paid on time. For millions of family businesses, this will be a lifeline in troubled waters.” A revision proposal should be expected in 2023.
  • A single set of tax rules named ‘BEFIT’: According to the Commission, BEFIT will establish a single set of tax rules for doing business in Europe, resulting in less red tape for companies operating in the single market. In practical terms, BEFIT should consolidate the profits of the European members of a multinational group into a single tax base, which will then be apportioned between Member States according to a formula, to be taxed at national corporate tax rates. The specifics of the scheme are expected in 2023.

The “SME Relief Package” was later further explained in a European Commission press release following a presentation by DG GROW Commissioner Thierry Breton. Notably regarding late payment, the Commission places securing cash flow for SMEs as its priority. The communiqué recognizes that overdue payments threaten the survival of SMEs recognising that less than 40% of payments in the EU – be they by public authorities or businesses – are made within the contractual deadline, while identifying construction as one of the most critical sectors.

EBC has been actively advocating for a long time for the revision of the Late Payment Directive, which dates back to 2011. In fact, this revision had been foreseen since February 2020 and the announcement of the SME strategy. However, political will to go forward was missing, with humongous pressure from other actors and sectors to keep the status quo. We were therefore pleased to see these efforts come to fruition with the announcement of this reform coming from the highest level.

EBC will continue to closely follow the implementation of the initiatives announced to relieve SMEs, and contribute to the public consultation on the revision of the Late Payment Directive.

To read the whole State of the Union speech, click here.

To read EBC’s position paper on Late Payment, click here