In the UK construction industry, clients and main contractors have traditionally withheld for a time part of the payment owed to specialist contractors and builders, as security against defective work or risk of insolvency.
However, the practice of cash retentions causes problems for firms waiting for payment for completed works. Some £10.5bn of the overall construction sector turnover of £220 billion is held in retentions by clients and main contractors from small and medium-sized businesses down the supply chain. An estimated £7.8bn in retentions has been unpaid in the construction sector over the last three years, and in the same period £700m of retentions were lost due to upstream insolvencies.
Now, 23 associations, led by the Building Engineering Services Association and the Electrical Contractors Association, are campaigning for new regulations specifying that retentions are held in a statutory retention deposit scheme, rather than in clients’ own bank accounts. This is an approach that they say is already used successfully in Australia.
It is also the solution proposed in a private member’s bill to be debated in the House of Commons on 9th January. Introduced by Waveney MP Peter Aldous, the bill seeks to amend the 1996 Construction Act to ensure that retentions within construction are held in a third party trust scheme.
Signatories to the campaign to move to a statutory retention deposit scheme are:
- Electrical Contractors Association
- Building Engineering Services Association
- Specialist Engineering Constractors Group
- British Constructional Steelwork Association
- Lift & Escalator Industry Association
- Scottish Electrical Contractors' Association – SELECT
- National Federation of Builders
- Association of Plumbing and Heating Contractors
- Scottish & Northern Ireland Plumbing Employers’ Federation
- Contract Flooring Association
- Structural Timber Association
- British Blind & Shutter Association
- Confederation of Construction Specialists
- Federation of Traditional Metal Roofing Contractors
- Lead Contractors Association
- National Association of Shopfitters
- National Federation of Demolition Contractors
- Chartered Association of Building Engineers
- Federation of Environmental Trade Associations
- Scaffolding Association
- Stone Federation Great Britain
- Glass & Glazing Federation
- Finishes & Interiors Sector