Parliament debates adoption of project bank accounts

New Bill aims to ensure small businesses are paid ‘directly and promptly’

New Bill aims to ensure small businesses are paid ‘directly and promptly’

A new Bill calling for payments on government and public authority contracts to be made through a ‘project bank account’ was put before Parliament last month.

The Public Sector Supply Chains (Project Bank Accounts) Bill, backed by the Specialist Engineering Contractors’ (SEC) Group, was proposed by Debbie Abrahams MP to help ensure small businesses are paid ‘directly
and promptly’.

It will also protect them from the kind of losses sustained by supply chain firms after the collapse of Carillion.

‘Late payment by large businesses is a massive issue across all business sectors, leading to billions of pounds being owed to smaller companies for work that has been done,’ said Abrahams.

‘When payments take a long time working their way along a supply chain from the contracting authority, there is a risk that the cash could be cut off at any time because of payer insolvency.

‘My Bill aims to set in law the requirement that parties delivering government and public authority work – from the lead contractor right down through the supply chain – will receive payment from the same secure pot of money.’

Carillion collapsed in January 2018 owing more than £2bn to smaller suppliers, which created a ‘catastrophic effect’ that must be avoided in the future, Parliament was told.

Abrahams added that the ‘precarious position’ of other large construction firms meant the government should take ‘urgent action’.

SEC Group chief executive Rudi Klein said project bank accounts were ‘acknowledged to be the most effective method of ensuring secure and regular cash flow’.