The government published a consultation paper on the issue of cash retentions in the construction industry last month, along with research that it had commissioned to support policy proposals. [See our previous report here.]
That research, carried out by consultants Pye Tait for the Department of Business, Energy & Industrial Strategy (BEIS), revealed that almost £700m worth of cash retention had been lost in construction by reason of insolvencies over a three-year period.
The Specialist Engineering Contractors’ (SEC) Group described the figure as “shocking” and said that it was far in excess of its own estimates.
SEC Group chief executive Rudi Klein said that this sum justified legislation to ring-fence retention monies. “The bulk of these monies will have been lost by SMEs,” he said. “They legally belong to the firms from whom the monies were withheld; consent to the withholding of the monies did not extend to their being used to pay off the insolvent party’s creditors. This represents a scandalous and continuing drain on the scarce resources of SMEs in the construction industry.”
SEC Group has been campaigning for all cash retentions to be deposited with independently run retention deposit schemes.
Rudi Klein added: “Given the dire finances of some of the UK’s largest construction companies it is even more urgent that parliamentary time is secured for legislation to protect retention monies.”