Smaller construction suppliers working on National Highways projects are being automatically opted-in to a scheme that protects payments.
The government body uses project bank accounts (PBAs) help to ensure contractors get paid faster, within 18 days on average, to improve cash flow.
The system also ensures all contractors get paid even if the lead contractor goes into liquidation.
All tier 1 contractors and tier 2 subcontractors will now automatically be signed up to the ring-fenced payment scheme.
National Highways head of cost intelligence Lloyd Biddell said: “This is a significant and game-changing development and we believe could even be a world first for project bank accounts.”
Up to now tier 1 and tier 2 subcontractors had the option to opt-in to PBAs. But around 20% of tier 2 didn’t choose this, despite often being the ones most likely to benefit. Biddell argued this was because the sign-up process was “daunting” and the benefits it offered “confusing”.
National Highways has used PBAs for a decade already. It hopes switching to an opt-out rather than opt-in approach will mean more subcontractors benefit from them.
Payment campaigner Professor Rudi Klein argued that PBAs were “the most effective mechanism” for improving payment security.
He added: “National Highways’ achievement in ensuring 18-day payments to its supply chains is now providing a massive boost for SMEs currently facing unprecedented cost pressures.
“If you’re involved in a public sector contract and not using PBAs, what’s stopping you?”
