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Scotland launches consultation on cash retentions

4 Dec 19 The Scottish government has opened consultation on the use of cash retentions with construction contracts.

“There is evidence that some payment practices prevalent in the construction industry are a barrier to investment, productivity improvements and growth,” says the introduction to the consultation. “Cash retention, where the process is misused or abused, can be one such practice.”

The Scottish government agreed to a review of retention payments after hearing concerns expressed by parts of the industry. It commissioned research from management consultant Pye Tait to support the review and that report is published alongside the consultation. Pye Tait has previously done very similar work for the UK government.

The purpose of Scotland's consultation is to seek information on the practice of cash retention in public and private sector construction contracts in Scotland and to gather views on Pye Tait's findings.

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The Specialist Engineering Contractors’ (SEC) Group has been campaigning for change. It said that in practice the retention monies – which belong to the firms from whom they have been withheld – are used to bolster the cashflow of large companies and even many public sector bodies such as local authorities. It pointed out that various estimates put the loss of cash retentions from the Carillion collapse as between £250m and £500m.

SEC Group Scotland has been lobbying members of the Scottish Parliament to support legislation to ring-fence the monies. SEC Group Scotland national executive officer Alan Wilson said: “Our message is clear. Cash retentions must be put in a ring-fenced account or scheme.  In this way we are more likely to see the end of a 200-year-old practice which has been abused to the detriment of small firms which often wait years to get their retentions released.”

The consultation closes on 25th March 2020 (link to Scottish government consultation site opens in new tab).

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