The SMEs of Europe have been facing difficult times in recent years. The COVID-19 pandemic brought uncertainty, restrictions forced many businesses to temporarily close down, while other sectors were affected by supply-chain shortages. After the brief recovery period that followed the pandemic, the world economy and SMEs are now facing new challenges: inflation, skyrocketing energy prices, and supply disruptions – all exacerbated by the war in Ukraine.
The economic effects of COVID-19 shed light on the fact that Europe needs to be better prepared for economic disruptions and crises, and that SMEs need a predictable and supportive framework to prepare for the challenges of 2022 and onward. There are about 25 million SMEs in the European Union, making up 99,8% of businesses in the EU. Employing nearly 100 million people, they play a crucial role in the European economy, Therefore it was welcomed by the European business community when an “SME Relief Package” was proposed by European Commission President Ursula Von der Leyen in her State of the Union speech on 14 September 2022.
“We must remove the obstacles that still hold our small companies back. They must be at the centre of this transformation – because they are the backbone of Europe’s long history of industrial prowess. And they have always put their employees first – even and especially in times of crisis. But inflation and uncertainty are weighing especially hard on them. This is why we will put forward an SME Relief Package.”
On 19 September 2022 the European Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs published details of the SME Relief Package. “For Europe to recover, SMEs need to recover.” – wrote Thierry Breton, Commissioner for the Internal Market, highlighting the importance of SMEs in his statement.
The SME Relief Package is made up of three main elements. Firstly, it aims at combating late payments and revising the Late Payment Directive. 1 in 4 bankruptcies in the EU are due to invoices not being paid on time. To prevent the ongoing economic challenges from making this rate even higher, the Late Payment Directive will be revised to provide a strong legal framework for SMEs across the European Single Market. This might provide SMEs with caps on B2B payments, tools for dispute resolution and mediation, and other support mechanisms, all aiming at preventing unfair practices against SMEs.
Second, the SME Relief Package strives to simplify tax rules to make it easier to do business in the Single Market. In an effort to reduce the administrative burden that weighs heavy on SMEs, the Commission announced BEFIT: a single set of tax rules for European businesses. In addition, some focus will be placed on creating an integrated digital platform, where SMEs can access information and assistance in their business queries when it comes to doing business across the EU borders.
Lastly, the package will give SMEs access to skills and finance. Efforts will be made so that available EU funds, such as the Recovery and Resilience Facility and InvestEU, reach SMEs and give them access to equity and loans. But SMEs are not only in need of financing: they also need a skilled workforce. Existing tools, such as the Pack for skills can be utilized to help SMEs upskill their employees and bring them up to speed in digital skills.
These measures will come to aid SMEs in the EU at a time of uncertainty and fragility and they are expected to balance for the economic challenges that lie ahead. “For millions of family businesses, this will be a lifeline in troubled waters.” – said President Von der Leyen about the package.