Cash flow boost for Scottish construction industry

The construction industry in Scotland is set to benefit from an initiative to speed up payments to contractors in public sector developments.

Project bank accounts are ring-fenced accounts from which payments can be made directly and simultaneously by a client to the main contractor and members of the supply chain, removing the scope for delays in payment from the main contractor’s bank account.

Deputy First Minister Nicola Sturgeon, announced the Scottish Government’s intention to trial the scheme during a procurement debate held today.

The trial is an early recommendation of the Review of Procurement in Construction, which is set to report in the summer on how Scotland’s £2 billion public construction contracts are awarded.

The system, which should be in place later this year, will speed up available funds to all contractors with electronic payments typically taking five days.

Project bank accounts will also reduce the time between initial expenditure on labour, plant and materials and subsequent payment, which will help reduce insolvencies, particularly amongst SMEs.

Ms Sturgeon said: “The Scottish Government is working tirelessly to improve on the procurement system in Scotland’s public sector in order to maximise economic growth and support jobs.

“We are happy to take on board the trial of project bank accounts for public sector projects and we are now looking to identify suitable opportunities which will support local and national economies and boost cash flow for both contractors and subcontractors.

“This should in turn help to preserve Scottish jobs and retain indigenous skills and expertise.

“Using project bank accounts guarantees a diverse and competitive marketplace, meaning that Scotland’s many SMEs are given the confidence to compete for Scottish construction contracts.”

Ken Lewandowski, deputy chair of the Review of Procurement in Construction, said: “Times are tough in the construction industry, and when payment for work is delayed, things only get tougher.

“Project bank accounts can help to relieve some of that pressure, especially on Scotland’s SMEs.

“The case for trialling them is so compelling, and the industry so important to the economy, that we felt it was appropriate to make this early recommendation, before we publish our full report in the summer.”