Late payments in Europe: how SMEs finance big companies—and what France reveals

Late payments in Europe have long been treated as a technical issue of business discipline. The latest evidence suggests otherwise. They have become a structural feature of the European economy—one that constrains investment, distorts financing conditions, and disproportionately burdens small and medium-sized enterprises (SMEs).

Each year, tens of billions of invoices are issued across the European Union—equivalent to more than 500 every second. A substantial share are paid beyond agreed terms, underscoring how deeply embedded the phenomenon has become.

In 2024, 52% of European companies reported experiencing problems due to late payments—the highest level recorded since recent EU-wide monitoring began.

The signal is reinforced by perception data: 73% of firms now consider late payments a serious issue, according to a European Commission survey cited by Laura Ballarín in a video message that opened the session, where she urged EU institutions to “deliver a truly European response” to a problem that remains unresolved.

Europe has built a single market—but not a single payment culture.

An Invisible Financing System

Across the European Union, average payment periods exceed 60 days in business-to-business transactions and reach around 70 days in government transactions.

These timelines persist in an economy where invoices are issued, transmitted, and approved almost instantly.

As Anders Persson put it during the debate:

“One or two days, perhaps. Even six days is already generous.”

In reality, a significant share of transactions still slip beyond agreed terms. Persson noted that around 28% of invoices are paid late—adding granularity to broader survey data and highlighting how widespread, though uneven, the problem has become.

Large companies actively use their bargaining power to extend payment terms, effectively transforming suppliers into a source of financing. In practice, postponements can stretch far beyond averages: 80, 90, or even 110 days were cited during discussions—levels that SMEs cannot sustainably absorb.

Data supports this interpretation. Extended contractual payment terms translate into longer actual payment periods in 87% of cases.

“This is not administrative—it is financing,” Persson added.

“Larger companies are financing their working capital through SMEs.”

At scale, the effect is considerable. Presenting the Observatory’s findings, Cinzia Alcidi, Senior Research Fellow at CEPS, pointed to more than €100 billion in liquidity tied up annually across the EU, including around €19 billion in France alone—an invisible but massive transfer of cash across the economy.

SMEs: Absorbing the Shock

For SMEs, the consequences are immediate.

For many smaller firms, this translates into a simple reality: covering wages, taxes, and operating costs for weeks—or months—before a single invoice is settled.

Delayed payments increase working capital requirements, deepen reliance on external financing, and heighten exposure to liquidity shocks.

In sectors such as construction and subcontracting, this can mean carrying several months of payroll before payment is received.

The broader impact is measurable:

• 40% of firms report reduced investment and growth
• 31% consider late payments a threat to their survival
• Companies spend nearly 10 hours per week chasing overdue invoices

That lost time—more than a full working day each week—constitutes a hidden but significant drag on productivity, especially for micro-enterprises.

Financial constraints reinforce the cycle. Late payments reduce access to financing. Restricted access to funding, in turn, increases the likelihood of further deferred settlements. The result is a self-reinforcing liquidity trap.

Meanwhile, 56% of companies report having accepted payment terms longer than they are comfortable with, reflecting the imbalance of negotiating power.

To mitigate these pressures, some firms increasingly turn to market-based solutions such as factoring, credit insurance, or supply chain finance.

While these instruments can ease short-term liquidity constraints, they come at a cost—and ultimately reinforce the underlying asymmetry by institutionalising delayed payments as a financing model rather than resolving them.

A System Under Strain

Macroeconomic conditions are now amplifying these structural weaknesses.

53% of companies say the economic slowdown is making it harder to pay suppliers on time, while 54% report growing concern about their clients’ ability to meet deadlines. As pressure builds, behaviour adjusts: 31% of firms delay their own payments because they themselves are paid late.

As Jesper Beinov representing SMVdanmark, noted during the SME Assembly 2025 workshop “Ending the Wait: Securing Fair Payment Conditions for SMEs”:

“Late payments are a structural problem. They reduce growth, competitiveness and trust across the market.”

Export-oriented firms face additional exposure. 56% of exporters report late payment problems, compared with 49% of non-exporters—a gap that reflects the added complexity of cross-border transactions in a fragmented system.

Public Authorities: Lagging Behind

If private-sector practices are part of the problem, public authorities are not exempt.

Despite obligations set out in the Late Payment Directive, governments consistently take longer to pay than businesses. In 2024, payment times in government transactions approached 70 days on average.

In practice, this means suppliers waiting months to be paid by public clients that officially settle invoices in just over a few weeks.

This weakens the credibility of the system. As both regulators and counterparties, public authorities are expected to lead by example—but often fall short.

Fragmentation and Uneven Performance

Payment practices vary widely across Member States. Countries such as Poland, the Czech Republic, and Luxembourg report higher levels of disruption, while the Netherlands and Bulgaria perform comparatively better.

This divide is not merely statistical. It reflects deeply embedded differences in payment culture and enforcement. Northern European systems tend to emphasise predictability and compliance, while in parts of Central and Eastern Europe, longer and more flexible payment practices remain more common.

For businesses operating across borders, the result is not integration—but friction.

France: A Revealing Paradox

France illustrates the broader European paradox. Despite one of the most developed enforcement frameworks—including regular sanctions and long-standing monitoring mechanisms—late payments remain widespread.

A large share of French companies report exposure to payment delays, despite one of the most developed enforcement frameworks in Europe. The gap between formal compliance and business reality is particularly visible in public procurement, where official payment targets are short, yet suppliers report much longer effective delays—often approaching 70 days.

The economic impact is equally significant. An estimated €19 billion in liquidity is tied up in late payments in France—much of it borne by SMEs while effectively benefiting larger firms that rely on supplier credit.

In some public sectors, delays stretch even further. In France, hospitals operate under an extended payment exemption of 50 days, yet the average actual payment time reached 63.4 days in 2024—and rises to 121.5 days in overseas territories—illustrating how structural frictions persist even within tightly regulated environments.

Even in a mature regulatory system, enforcement alone appears insufficient to offset structural imbalances in bargaining power.

Regulation: A Divided Europe

The European Commission has proposed replacing the 2011 directive with a regulation introducing a strict 30-day payment cap. The European Parliament has endorsed the approach. But in the Council, resistance remains strong—and increasingly structured.

Several Member States, particularly those where supplier credit is deeply embedded in corporate financing models, are pushing back. Others fear disruption in sectors reliant on extended commercial cycles, such as wholesale or parts of the cultural economy.

As Jesper Beinov put it bluntly:

“The data speaks for itself: action is needed now.”

Survey data reflects the divide: 41% support a mandatory cap, 23% support it with flexibility, and 37% oppose it.

What appears as a technical debate over payment terms is, in reality, a deeper conflict between competing economic models—and between harmonisation and national discretion.

As Laura Ballarín warned, progress now depends on whether the Council is willing to move beyond the current deadlock.

Implementation: The Missing Link

Even where rules exist, enforcement remains uneven.

Large companies are often able to impose extended terms while failing to respect legal deadlines. The issue is not only the absence of rules—but the weakness of their application.

Examples across Europe suggest that stronger enforcement can work. France has developed mediation mechanisms, the Netherlands has introduced guarantee schemes, and in sectors such as perishable goods, strict 30-day limits already apply without evident disruption.

As Anders Persson warned:

Clear rules change behaviour—but only if they are applied.

Technology Is Not the Constraint

Digitalisation has largely removed operational barriers to rapid payment. Invoices are processed instantly; approvals are often automated.

Yet delays persist—not because payments cannot be made quickly, but because they are not intended to be.

As discussed during the SME Assembly 2025 workshop “Ending the wait: Securing fair payment conditions for SMEs,” payment terms of 80, 90 or even 110 days are not administrative delays, but deliberate financial choices.

In practice, supplier credit has become an embedded financing mechanism.

A Structural Issue with Strategic Consequences

Late payments are not just a business inconvenience—they are a systemic transfer of liquidity from smaller, more constrained firms to larger, more powerful ones.

They weigh on investment, weaken productivity, and distort competition across the European economy.

International comparisons highlight alternative approaches. In China’s automotive sector, for instance, payment terms are capped at 30 days—a reminder that stricter frameworks are not incompatible with industrial competitiveness.

The policy debate has now reached a critical point. The Commission and Parliament are aligned. The Council remains divided.

Emerging discussions around corporate transparency and sustainability reporting may add further pressure for improved payment practices, although data remains limited at this stage.

The question is no longer whether Europe should act—but whether it can afford not to.The issue is no longer technical—it is political.