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Wed June 03 2020

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Industry leaders ask PM to release retention monies and get stores to re-open

1 Apr The Construction Leadership Council has written to the prime minister setting out a six-item wish list to help companies in the industry survive the crisis.

Among the recommendation is that all government bodies release all retention monies that they are sitting on to provide an immediate injection of liquidity to the construction industry.

The letter from Construction Leadership Council (CLC) co-chair Andy Mitchell also requests that the government intervene to get builders’ merchants back open and materials producers back into action.

Mr Mitchell writes: “The construction industry also needs clear support and recognition from the government for the essential work that it is doing, and the role it is playing in supporting public services and keeping the economy functioning. For understandable reasons, we are seeing the closure of key construction product and material manufacturers, in parallel with the closure of electrical, plumbing and general builders’ merchants, and there is the very real prospect of many of the essential works not being able to be done, or unduly delayed, by difficulties in securing products and materials.

“I ask therefore that you and your ministers give very clear and visible encouragement that the production of building materials continues, if at all possible, and that electrical, plumbing and general builders’ merchants remain open so that essential maintenance and construction works can continue – and that the workers doing this are recognised, supported and appreciated.”

While praising business rescue packages already put in place, the CLC wants more, and the letter sets out six measures “which would make a huge difference to many companies within the industry”.

To quote, these are:

1. In addition to the Job Retention Scheme, suspending PAYE and CIS tax due to HMRC in April and May for construction and consultancy firms and workers, with no financial penalty. This will relieve some immediate cashflow challenges, and give companies time to secure the support of measures that the government has established;

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2. Deferring/cancelling Apprenticeship Levy payments due for the duration of the crisis. Whilst firms in the sector are committed to retaining apprentices, and in the longer term increasing the number of these, whilst the current restrictions are in place it is not possible for firms to train apprentices. This would further reduce cash flow pressure, but without affecting the longer-term provision of funding for apprenticeships;

3. We welcome the guidance on flexibilities in public procurement rules provided by Policy Procurement Notice 02/20: Supplier relief due to COVID-19, but urge ministers to continue to encourage all public sector clients, regulated utilities and firms in the private sector working on public infrastructure to expedite cashflow through the supply chain, by making use of these;

4. Support for the directors of micro-businesses. There are many directors of small building firms and consultancies who pay themselves a small salary, and top this up through dividend payments. These currently fall between the support provided by the Job Retention Scheme and through the assistance for the self-employed announced last week. This is a problem for other sectors too, and it would be welcome if the government could ensure these directors would be able to access support from one of these schemes;

5. Retention release - it is estimated that throughout the industry there is £4.5bn held by clients and firms in the supply chain) in the form of cash retentions, which is a routine withholding of between 1% to 5% of each regular payment to be released upon successful completion of the works without defects. There will, no doubt, be some strong opinions over this, but were the government to direct all government bodies to release all retention monies held this would inject cash at all levels of the construction supply chain;

6. Extend the £25k SME business continuity grants scheme to the construction sector.

CLC co-chair Andy Mitchell has for the past two weeks been holding a daily virtual meeting with the chief executives of 11 major federations and representative bodies from across the construction industry. These have resulted in, among other things, the Site Operating Procedures for observing Public Health England guidance on hygiene and social distancing, and a guide to safe mothballing of sites.

The Construction Leadership Council is a panel of government appointees selected from different parts of the construction industry and civil service. It is co-chaired by the construction minister (currently Nadhim Zahawi) and the secretariat is provided by the Department for Business Energy & Industrial Strategy (BEIS).

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