Contract Reforms Will Create Growth for Small Firms in Europe

Small-business groups have backed a proposal for a Europe-wide consumer rights law which will enable freer trading across European borders.

The so-called ’28th regime’, outlined by the European Commission (EC) this week, will be an optional law that small businesses and their customers can use in place of national sales contract laws. At present, any business selling in one of the 27 EU member states has to comply with the sales contract and consumer rights law in that country.

The EC proposal stressed that the legal compliance costs of selling into new countries, each of which has its own sales contract regulations, can dissuade businesses from venturing into new markets. It added that businesses spend an average of €10,000 in legal costs when setting up sales channels in EU countries for the first time.

The Commission said a pan-European contract would save businesses money by providing a common set of sales regulations that would be acceptable in all EU countries. Businesses would just have to comply once and then could trade freely across borders – provided they and their customer have agreed to make a transaction in accordance with the 28th regime.

The British Retail Consortium (BRC) welcomed the proposal and said that such a law was urgently needed in the wake of new research by the Institute for Fiscal Studies which predicted that middle-income families are about to see the biggest drop in real incomes since the 1970s. The research forecasted that median incomes will drop by 7 per cent in real terms between now and 2013.

“There’s no question that people’s disposable incomes are being squeezed because they are getting no or low wage increases, while utilities and insurance are shooting up.”

said BRC spokesman Richard Dodd.

“The 28th regime is potentially a very good thing, and there’s potential for big growth there for UK retailers – particularly online retailers, who are well ahead of the game. The UK online retailing market is more developed than in any other EU country and we’ve almost twice as much of our retail online compared to the average for the EU. There’s an awful lot of potential for UK retailers trading online with customers in other EU countries.”

The Federation of Small Businesses (FSB) also backed the proposal.

“We know that businesses do want to branch into export markets, but there is a fear of red tape and regulation, and actually getting started.”

said an FSB spokesman.

The proposals must be approved by both the European Parliament and Council of Ministers before they could come into force.

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