National Highways makes project bank accounts default option

Contractors working on National Highways projects will now be automatically enrolled into its project bank accounts.

The initiative aims to ensure monies are held in trust in case a lead contractor becomes insolvent during a project, protecting cash for smaller firms. It is also an alternative to retentions, whereby a client or main contractor withholds a portion of payment in the event that defects emerge.

National Highways introduced project bank accounts in 2012 but the process required companies to opt in. They will now be included in the process unless they specifically opt out.

The client’s head of cost intelligence, Lloyd Biddell, said: “We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them.

“We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out. This is a significant and game-changing development, and we believe [it] could even be a world first for project bank accounts.”

The UK government opened a consultation on the issue of retentions in 2017, which found a majority of respondents wanted a system in which money was ring-fenced. There has been no Whitehall-wide policy change on the issue yet, however.

From February, the advice from the Scottish Government to public bodies in the nation is that they should consider using trust accounts, a form of project bank account.

Kleinlegal director and long-time prompt-payment campaigner Rudi Klein recently wrote for Construction News criticising the lack of UK government action on the issue in recent years.

In a statement supplied by National Highways on its project bank accounts policy change, he said: “If you’re involved in a public sector contract and not using [project bank accounts], what’s stopping you?”

National Highways said the 20 per cent of its suppliers that have not opted in to its policy previously have tended to be very small suppliers or those unsure of its benefits. They will now be signed up unless they request to opt out.

“This will make the signing-up process easier and better protect suppliers against further lead-contractor insolvencies,” a spokesperson said.