At least £4 billion of government spending is due to be paid directly to SMEs working on public sector construction projects after cabinet office minister Francis Maude announced plans to up the use of project bank accounts.
The Cabinet Office estimates that 20 per cent of the total spending on government construction will be channelled through project bank accounts within three years.
It means subcontractors will no longer have to wait for main contractors to process their payment, instead receiving it directly through a bank account specific to the project they are working on. At present about £500m worth of work is paid through the accounts.
Mr Maude said: “We are leading the way with this innovative 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.”
Specialist engineering contractors association chief executive Rudi Klein – a vociferous campaigner for the use of project bank accounts – said he was “delighted” by the announcement.
He said the government’s estimates that 20 per cent of spending would be funnelled through the accounts were conservative and pledged to take the fight for fair payment to local authorities and the private sector.
As CN revealed last week, the measure was agreed at the first meeting of the Government Construction Board in September.