The Bill sets out the clearest route yet to scrap the hated retention system after decades of campaigning by subcontractors and specialist contractors.

Retentions see clients and main contractors hold back a slice of supply chain payments, usually until defects are fixed or a defects period expires.

Specialists have long argued the system drains working capital, delays payment for completed work and leaves firms exposed when upstream contractors collapse.

Full details of the Bill were published yesterday in Parliament marking its first reading.

Under the Bill, the industry will get a two-year transition period once the relevant provisions become law.

Retention clauses can still be agreed during that window, but will become ineffective after a further one-year run-off.

That means retentions would not be fully phased out for three years from the introduction of the new rules.

After the two-year transition period ends, any new clause allowing one party to deduct or retain cash under a construction contract will be void.

Firms will also be blocked from varying old retention clauses unless the change improves the payee’s position.

Any retained sums still unpaid at the end of the three-year run-off will become due under the Construction Act payment regime.

Public bodies will then have 30 days from the payment due date to release transitional retained sums, while private sector payers will have 60 days.

The Bill also adds a financial sting for unauthorised retentions after the transition period.

Where a retention debt arises, the unpaid party will be entitled to recover a fixed sum worth 50% of the retention debt, on top of statutory interest and existing late payment compensation.

The Bill still has to complete its passage through Parliament and receive Royal Assent before the countdown can begin.

Even then, the three-year clock only starts once ministers bring the relevant retention provisions into force.