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Mon December 11 2017

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News » UK » Cash retentions bill gets industry backing » published 6 Dec 2017

Cash retentions bill gets industry backing

Three industry associations have thrown their weight behind a backbench MP’s attempt to reform construction’s use of cash retentions, despite it being unlikely to succeed.

Peter Aldous MP Above: Peter Aldous MP

Peter Aldous, Conservative MP for Waveney, has tabled a private member’s bill to protect the millions of pounds of cash retentions withheld from construction firms down the supply chain. 

The Ten Minute Rule Bill will seek to amend the 1996 Construction Act and ensure that retentions within construction are held in a third party trust scheme. A key aim will be to help protect companies in the construction supply chain from insolvency and payment uncertainly. The first reading of the bill in the House of Commons will be on 9th January 2018.

Such bills almost never reach the statute book but are rather an opportunity for backbench MPs to highlight issues of concern and apply pressure to government. The government is already consulting on the retentions issue with a view to bringing forward its own legislative reforms. [See our previous report here.]

However, despite only a slim chance of success, Mr Aldous has received backing from the Building Engineering Services Association (BESA) and the Electrical Contractors' Association (ECA) and the Specialist Engineering Contractors’ Group (SEC).

Recent research commissioned by the Department for Business, Energy & Industrial Strategy (BEIS) has revealed that £7.8bn worth of retentions was outstanding over a three-year period.  Peter Aldous said that he was concerned about the impact on SMEs: “I have been aware of retentions as an issue for a while, and with construction being a tough industry and uncertainty surrounding many aspects of the economy, small businesses need as much support as possible. There are a number of specialist engineering firms in Waveney, and what this bill aims to do is to protect them and their livelihoods as well as 280,000 other construction SMEs nationwide.”

He added: “Over the past three years, £700m worth of retention payments to small businesses were lost due to the insolvency of a client, and if a small business suffers from an upstream insolvency of this kind, they are punished twice; firstly with the loss of work, and secondly with the loss of retention money. We therefore need action on this before more millions are lost.

“SMEs are the backbone of the UK economy, which is why they need support and protection. This bill is not about abolishing payment retentions; it is about making sure that people’s money is safe so that businesses can grow and invest in their future.”

SEC chief executive Rudi Klein 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.”

ECA director Paul Reeve said: “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”.

BESA legal and commercial director Rob Driscoll said: “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.”

In April 2017 Scottish National Party MP Alan Brown laid a similar private member’s bill to protect cash retentions but it was overtaken by the general election.

Peter Aldous was a chartered surveyor before being elected to parliament in 2010.

 

The government’s own consultation document on retentions reform is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/654258/2017.10.23_Retentions_Payments_Consultation_FINAL.pdf

You can reply to the consultation online at: beisgovuk.citizenspace.com/im/retention-payments-in-the-construction-industry

The deadline for responses is 19th January 2018.

 

 

MPU

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This article was published on 6 Dec 2017 (last updated on 7 Dec 2017).

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