The new ruling will mean that anyone who overshoots the 30-day limit will be slapped with a €40 (£27) compensation fee, as well as an 8% surcharge on the cash they still owe. Since businesses are currently owed something in the region of £24bn in late payments, that's certainly positive – particularly for those who are used to dealing with large retailers, some of whom are known to take as long as 90 days to cough up. Then again, it cuts both ways: for small firms who have, for one reason or another, been able to agree longer payment terms with their suppliers, cashflow could get tighter when the new legislation comes into force.
Still, for those businesses working with public sector bodies, it’s going to come as a bit of a blow if David Cameron scraps the current payment target to comply with EU rules - although there's been no indication yet that he's planning to. Any other cash-strapped supplier of that size would be sorely tempted to extend their deadline, to free up a bit of short-term cash - but unlike businesses, the Government doesn't really have to worry about running out of the readies (since it can always borrow or print more).
That said, surveys by the FPB have shown that the 10-day target, instigated by Gordon Brown in 2008 as part of a package to help struggling businesses, hasn’t been a roaring success: of all invoices to English councils, just 44% have been paid within the allotted timeframe, and less than a third of those to the NHS. So perhaps reverting to 30 days wouldn't make much difference,in practice.
What's more, given the extent of the spending cuts due in October, any business that manages to hang on to a public sector contract will probably just be thanking their lucky stars that they’ve got one at all – never mind what the payment terms are.