Improving access to finance: A new and quicker way to pay construction businesses in Wales

A new and quicker way of paying businesses in the public sector construction supply chain in Wales was unveiled yesterday by Finance Minister, Jane Hutt.

15th January 2014

The construction sector in Wales is dominated by small to medium enterprises (SMEs), many of whom play important roles in delivery of public sector projects through sub-contracting arrangements. Many of these businesses are dependent on main contractors ensuring fair and prompt payment through the supply chain.

Project Bank Accounts (PBAs) are ring-fenced bank accounts whose sole purpose is to act as a channel for payment on construction projects to ensure that contractors, key subcontractors and key members of the supply chain are paid on the contractually agreed dates. This eases cash flow pressures for business and supports closer working within the supply chain.

At least three potential PBA pilot projects have been identified with Flintshire, Swansea and Torfaen Councils all identifying at least one project from their 21st Century School programmes to adopt the PBA approach.

Jane Hutt said:

“Boosting economic growth and creating jobs in the Welsh economy is a priority for this government.

“SME’s are a vital part of the construction sector in Wales, and many play critical roles through the supply chain in delivering our public sector construction contracts. Access to finance and cash flow are vital to smaller sub-contractors and it is only fair that they receive prompt payment in accordance with contract performance.

“I am grateful to the Specialist Engineering Contractors’ group in Wales for their enthusiastic support in helping inform our approach to introducing the use of Project Bank Accounts in the Welsh public sector.

“The use of PBAs is an innovative way of ensuring fair payment throughout the supply chain within construction contracts, and will ensure that both main and sub-contractors are paid promptly for works performed.

“This is another example of my commitment to using public procurement policy to enable smaller businesses to prosper through delivery of contracts in Wales.”
The Construction Procurement Strategy, which was launched by the Finance Minister in July 2013, made a commitment to introduce PBA’s into Welsh public sector construction contracts as a means to promote fair payment. Professor Dylan Jones-Evans’ Access to Finance Review, which was commissioned by Economy Minister Edwina Hart, also recommended that the Welsh Government should use its purchasing power in Wales to encourage its suppliers to pay their own supply chain promptly.