The account, which has been developed with property and construction consultant Rider Levett Bucknall, provides an effective means of supply chain payment to increase transparency and trust in the sector as well generate cost efficiencies.
The Barclays project bank account, which will be available from 28 April 2008, is operated under the joint authority of the client and the main contractor on behalf of all parties including sub contractors. Upon certification of stage payments under the construction contract, funds paid into the Barclays project bank account are electronically transferred by Barclays to the ultimate beneficiaries. An account Bank agreement also underpins the account, effectively ring-fencing the funds from an administrator. This will provide all parties with the surety that the payments due to them from the account are secure and will be made on time.
Research for the Office of Government Commerce predicts the increase in payment certainty will reduce tender prices by around 2.5 per cent, as well as generating further savings over time in overheads associated with debt chasing and administration.
Barclays Commercial Bank has helped Rider Levett Bucknall develop the account in response to calls for fairer payment systems and terms within the construction industry.
The accounts are recommended by the Office of Government Commerce’s guide to fair payment and government departments and agencies such as the Highway Agency and the Ministry of Justice are expected to adopt them from May 2008. Barclays will also target private sector clients such as supermarkets and high street retailers to use the account.
Inefficient payment practices are still common within the UK construction industry and in the current difficult market conditions, there is an increased likelihood of late payments and less capacity for businesses to cope with the cash squeeze they create. The Federation of Small Businesses estimates that 10 per cent of small business collapses are triggered by late or non-payment of bills.
Barclays Commercial Bank Business Services, Peter Day said: "Barclays is pleased to launch this new account which will enable a more streamlined and fair payment process at a time when businesses are even more focused on their cash flow. Simple and transparent, this account could herald a step change in the culture and practice of the industry and encourage growth."