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The European Union plans to impose 30-day payment terms on businesses within the bloc, frustrating retail groups who say the proposals will inadvertently drive up prices and encourage them to buy more goods from China.
The move is aimed at supporting small businesses. But Kingfisher, owner of British home improvement store B&Q and European DIY stores Castorama and Brico Dépôt, said the 30-day limit proposed by the European Commission this month would cause the company to raise prices to generate enough cash to pay suppliers on time.
“It’s not free. More than half of Kingfisher’s sales come from the EU,” said Nick Lakin, head of corporate affairs. “This ultimately has an impact on product availability, choice and price for consumers.” ”
Retailers in industries such as clothing and furniture prefer to negotiate long-term terms with suppliers so that they can pay in installments.
Larkin said Kingfisher preferred 30-day payment terms for smaller businesses to avoid “financial pressure on quality suppliers”, but the company had negotiated variable payment terms of up to 60 days across Europe , 90 days for Asian suppliers.
Alisdair Gray, EU affairs director of EDRA, the European DIY Retail Association, said that at least half of the goods in home improvement stores come from China. “Businesses are going to buy more from China because they give you 90 days,” he said.
“We are very worried,” said Christel Delberg, director-general of Commerce Europe, a representative body for retailers and wholesalers. “For example, if you are a small clothing boutique, you buy seasonal items in advance and usually sell them later. You pay your suppliers within a certain period of time. You don’t have the resources to buy stock upfront. That won’t be possible anymore.”
The proposals, which still need to be negotiated with the European Parliament and member states, are part of wider SME support measures announced by EU Economic Commissioner Paolo Gentiloni and Internal Market Commissioner Thierry Breton. earlier this month.
The European Commission said late payments hit small businesses particularly hard, with a quarter of EU bankruptcies caused by failure to pay invoices on time.
An official said the committee “believes that large retailers currently use long-term payment terms as a way of transferring business risk to smaller suppliers”. “The new cap on payment terms is expected to provide a fairer business environment across all industries, particularly in transactions between larger and smaller market players.”
The official added that the Netherlands, Poland and Spain had restricted payment terms “without causing a significant shift in supply chains to non-EU companies”.
Dutch Economic Affairs Minister Micky Adriaansens said she considered the wider measures “a good thing”, adding: “It’s all about (debtors’) financial planning. Small businesses have more A strong position, that’s fair.”
“Longer payment terms have a negative impact on SMEs,” said Sophia Zakari, director of corporate policy and legal affairs at business lobby group SMEunited. “Every party has its own interests. Our aim is Ensure SMEs do not suffer from late payments.”
But the expected changes come as inflation cuts into consumer spending across the EU and businesses adapt to new sustainability and due diligence regulations introduced in Brussels.
Under a 2019 EU directive, businesses buying fresh food must pay suppliers within 30 days, but can pay for other groceries within 60 days.
Giuseppe Brambilla, vice president of Italian distribution company trade group Federdistribuzione, said changing the 60-day limit “means moving a lot of cash”. “This will inevitably have an impact on inflation . . . We will have to increase pricing.”
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