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Network Rail slashes payment terms by five weeks

Network Rail says it will reduce the time it takes to pay its contractors by five weeks after implementing a new regime this month.

The rail operator’s investment projects arm says it will reduce the time it takes to pay contractors and suppliers to 21 days, down from 56 days.

Network Rail’s new regime was implemented on 1 October and applies to Network Rail’s standard payment terms for investment projects works contracts.

The new standard assumes payments will be made in seven days from the point of certification, typically 14 days, which compares favourably with long-standing industry model forms proposing payment times of 28 days and less.

NR’s investment projects finance and commercial director David McLoughlin said: “We want to improve the way we pay our contractors and suppliers and this revision to our payment terms will significantly shorten the time taken for Network Rail to complete payment. Suppliers and contractors of all sizes will now have much greater certainty over cash flows.

“This initiative aligns closely with a number of government initiatives relating to fair pay and reflects ambitions for closer and more collaborative working between Network Rail and strategic partners.”

The standard time for payments under the contracts had previously been 56 days – typically allowing 14 days to certify a payment, then 42 days for the payment to be made.

The new payment terms will be effective for all new contracts from 1 October 2011 and are not intended to impact existing contracts, where opportunities continue for contractors to choose to be paid earlier via the use of Network Rail’s reverse factoring facility, which guarantees prompt payment.

A new fair payment charter will be adopted by Network Rail later this year which will be communicated to the wider industry.

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