Network Rail to take industry lead enforcing 28-day payments and banning retentions

Network Rail has announced an overhaul in its contract payments which sees the rail industry becoming the first sector within the wider UK construction industry to enforce 28-day payments and a ban on retentions.

Thousands of UK SMEs are set to benefit from revised contract terms according to the rail organisation with the changes set to brought in ahead of the upcoming five-year funding period (CP6, 2019-2024). 

The move is seen as a vital step for the industry following the collapse of Carillion earlier this year which saw thousands of SME’s left out of pocket. The changes will mean tier one contractors are banned from using retentions and told to pay suppliers within 28 days of work being carried out.

Having implemented a best practice ‘Fair Payment Charter’ and applying these principles to their own payments to suppliers back in 2011, Network Rail describes the decision to formalise this regime for CP6 as “the next natural step” and something their major contractors support.

Commenting on the announcement, Stephen Blakey, commercial director at Network Rail said: “The Fair Payment Charter was about recognising that cash flow is the ‘life blood’ for every supplier by committing to pay for goods and services in a fair, predictable and timely way. Harnessing the support we have already received from our major suppliers, we have simply taken the next natural step and formalised that approach for CP6. Culturally, it sends a huge signal as to the value we place on a sustainable supply chain and the way we want to do business.”

Colas Rail, VolkerRail, VolkerFitzpatrick and Amco are among the first contractors to openly support the changes for CP6. 

James Quinnell, chief commercial officer of Colas Rail, said: “Colas Rail fully supported the adoption of the Fair Payment Charter and embedded such in its supply chain contracts at that time. We therefore welcome Network Rail’s desire to ‘contractualise’ this commitment across its supply chain.”

In further moves to assure cash flow and support its supply chain, Network Rail is also introducing the use of project bank accounts on some of its major projects, meaning payments to subcontractors can be agreed by the client and scrutinised more closely.

Steve Cocliff, Managing Director, VolkerRail, said: “VolkerRail has always been an advocate of fairness in everything it does and was one of the first to sign up to the fair payment charter in 2011. We are therefore very keen to support the leadership shown by Network Rail in its goal to abolish retentions and to fix payment terms at 28 days for the vitally important SME community.”

John Cox, managing director of rail at VolkerFitzpatrick, added: “VolkerFitzpatrick, in support of the leadership shown by Network Rail, consider the financial health of our supply chain to be of critical importance to meet our delivery commitments and as such we are fully supportive of formalising our commitment to fixed payment terms of no more than 28 days and the avoidance of holding retentions on our supply chain.”