Its tier one contractors, engineering firms and key suppliers have signed a 28 days payment and no retentions pledge that promises to transform practices in the rail industry.

The Fair Payment Charter, which will be launched today, will ensure that Network Rail’s Tier 1 contractors are paid 21 days after payment valuation date and their supply chain 7 days after that.

Previous Network Rail was paying at an average of 58 days.

Hated retentions will be abolished unless client Network Rail holds one from the main contractor, which would be on isolated jobs where it is deemed necessary.

The move is a huge breakthrough for fair payment in the industry as Network Rail stands as the biggest client outside of main Government spending departments to encourage its contractors to sign up to the pledge.

And crucially there is agreement that anything resembling pay when paid terms will not be employed in contracts.

Sub-subcontracts will also be expected to honour prompt payment terms, helping to safeguard cashflow throughout the huge rail supply chain.

All firms that have signed up to the Charter have agreed that deliberate delays, late payment or unjustified withholding of payments is “ethically unacceptable”.

All of Network Rail’s main contractors, engineering consultants and top level suppliers have signed the agreement.

Tim Gorman, commercial director at Balfour Beatty Rail, said: “We welcome the charter and will fully embrace its intent.

“Payment performance to the supply chain is a major factor in shaping the quality and depth of the relationship networks that are used to deliver projects.

“As we move to ever more collaborative forms of supply chain relationships, compliance with the charter will demonstrate our commitment to protecting the financial security of our supply chain providers and reinforce our core values of integrity and respect.”

Suzannah Nichol, chief executive of the National Specialist Contractors Council, said: “NSCC is delighted to see Network Rail, a high-profile client with a substantial portfolio of construction work, setting the standard for fair payment throughout its supply chain.

“Facilitating collaborative working and providing certainty of cash flow will enable specialist contractors to do what they do best and focus on the efficient and cost-effective delivery of the country’s rail infrastructure.”