A European Commission proposal to combat late payments to increase the financial resilience of smaller firms could achieve the opposite for SME retailers.
This is according to Independent Retail Europe, an association representing independent retailers across the EU, which suggests that the proposed rules will, in practice, weaken their financial position and favour large international suppliers to the detriment of their smaller customers.
Independent Retail Europe stated that for SME retailers, a 30-day payment deadline could impact their profitability. It explained that shorter payment terms might force retailers to sell their products more rapidly, potentially at a lower price, to be able to settle invoices with their suppliers.
Independent Retail Europe noted that retailers generally need more than 30 days to sell any goods to consumers that they have bought from suppliers. It notes that such a payment deadline could put them in a structural squeeze, which will inevitably erode their already low (1-3%) net profit margins, increasing their fragility.
The trade body suggested that the EC’s proposal will paradoxically safeguard the interests of industry giants to the detriment of SMEs. For instance, small electronic retail shops will be compelled to pay their large international manufacturers within 30 days.
The association noted the EC proposes to extend the 30-day term to the supply of non-perishable food products regulated differently under the Unfair Trading Practices (UTP) Directive. This inclusion bypasses the legal obligation placed on the Commission to evaluate the effect of the UTP Directive in November 2025 before proposing any change.
“Such changes without a comprehensive assessment will create unintended disruptions, especially as the UTP Directive is not applicable to very large suppliers, contrary to the Commission proposal on late payments,” said Independent Retail Europe.
“Therefore, we call on EU policy makers to strike a better balance between fair payment terms and economic sustainability to ensure the resilience of the retail sector and its diverse ecosystem.”
NAM Implications:
- Essentially, by having to pay suppliers in 30 days…
- …would weaken SME retailers’ financial position by having to sell goods cheaper to raise cash.
- This will eventually cause the delisting of slow-moving lines…
- …and erosion of the SME retailer pool.
