Banks could become even more reluctant to invest in PFI projects if proposed amendments to the Construction Act are passed, lawyers have warned

The bill, which is currently working its way through the House of Lords, proposes a ban on “pay when certified” notices. This means that subcontractors would be able to demand payment even if the main contractor has not been paid.

Lawyers have warned that if applied to PFI projects, the ban would prohibit the project relief clauses that shield PFI project companies from the liability to pay subcontractors if the project runs into difficulties.

Rupert Choat, a partner in CMS Cameron McKenna, said his law firm had twice warned the government that such changes would scare banks off funding PFI schemes. “If the bill is passed, banks could face a far bigger risk than at present. They could end up having to pay out money they don’t have. Banks are already reluctant to lend, and this is getting in the way. It’s a nonsense,” he said.

James Crossman, head of PFI/PPP services at Currie & Brown confirmed this was a “valid concern”. “It’s going to provide a new set of hurdles to the PFI process,” he said.