The Highways Agency is pioneering a prompt payment initiative for subcontractors and suppliers on two managed motorway schemes.
The supply chains will benefit on the M4/M5 managed motorways scheme (Bristol) and the M62 J25 to J28 managed motorway scheme (North Yorkshire)
The Agency is promising that suppliers will receive payment within a few days from the due date.
Over the next three years, the Agency proposes to use the “Project Bank Account” approach on over 20 construction and maintenance schemes which will benefit hundreds of companies, including smaller companies, involved in the projects, and see a total of over £2.5bn flowing through the new system.
A project bank account is a legally ring-fenced and protected bank account from which payments are made directly and simultaneously to all participating members of the supply chain.
Suppliers using the PBA will no longer have to wait for prime contractors to process their payment; instead they will receive it directly through a bank account specific to the project they are working on.
Minister for the Cabinet Office, Francis Maude, said: “We are leading the way with this approach to paying suppliers, and where better to do so than in an industry where 99 per cent of businesses are SMEs.
“Project Bank Accounts mean SMEs in the construction industry will be paid faster, freeing them of the burden of juggling with their cash and allowing them to focus on expanding their businesses.
“If you run a small company and you have to chase payment, it’s not only stressful, running around and spending time chasing invoices increases your costs even further. Companies involved in these projects will no longer have this headache. We will extend these further across the sector over the next two years.”