MP launches bid to end retentions abuse

Grant Prior 4 months ago

Proposals for a new Bill to outlaw abuse of the retentions system will get their first hearing in Parliament next month

Peter Aldous MP is seeking to amend the 1996 Construction Act and ensure that retentions are held in a third party trust scheme.

The The Ten Minute Rule Bill is being backed by construction trade bodies including the ECA and Building Engineering Services Association (BESA).

The Bill’s main aim is to help protect companies in the construction supply chain from insolvency and payment uncertainly.

Recent research by consultant Pye Tait on retentions revealed that over £700m worth of retention money has been lost due to upstream insolvency in the past three years and that on average £27,500 is held in retention per contractor.

In an industry of 280,000 SMEs, 44% of contractors have suffered non-payment through upstream insolvency in the last three years.

Paul Reeve, Director of Business & External Affairs at the ECA: “This Bill aims to protect the supply chain from the serious impact of lost retentions due to upstream insolvency.

“Way beyond those companies who are damaged by upstream insolvency, even the possibility of losing retention money in this way hampers small business investment and growth.

“As such, this Bill is entirely consistent with the aims of the new Industrial Strategy, which looks for innovation, and investment in skills”.

Rob Driscoll, Legal & Commercial Director at the BESA added: “With central government and major projects the biggest single construction client, the case for reform is inherently connected to the Government’s industrial strategy.

“To meet the challenges set by the recently launched Industrial Strategy and construction sector deal, enabling industry to re-invest in jobs, training, innovation and technological transformation, Government intervention is necessary to secure working capital that underpins the delivery models for the industry as a whole.”

The Bill will be introduced while the government consults over reforming the current retentions model. The government consultation runs until 19 January 2018.

Professor Rudi Klein, the CEO of the Specialist Engineering Contractors’ Group, said: “I’m very grateful to Peter Aldous for initiating this. All that is required is mutuality of security.

“If cash retentions are required as a form of security, there must also be security for the cash as exists in many other countries around the world.”

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