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News » UK » Survey reveals extent of retentions blight » published 21 Nov 2017

Survey reveals extent of retentions blight

A survey by a trio of trade associations has revealed that 56% of engineering services businesses has a substantial portion of their turnover being held by firms higher up the supply chain.

The Building Engineering Services Association (BESA), Electrical Contractors’ Association (ECA) and the Scottish electrical contractors’ association Select together conducted a survey of their members on the impact that payment retentions was having among their membership during the third quarter of 2017.

Almost one in three (32%) responding to the survey said that between 3% and 10% of their turnover was being held in retentions. A further 22% said that 1-2% of their turnover was tied up in retentions.

An additional five businesses said that more than 10% of their turnover was currently being retained by clients and main contractors. One firm said that more than 20% of its expected annual turnover was currently being held in retentions.

ECA chief executive Steve Bratt said: “The major problems associated with cash retentions in construction have been amply described in the recent Pye Tait review. In addition to being at risk from upstream insolvency, smaller businesses can’t invest enough in skills or equipment, or help to improve industry productivity, if their cash flow is restricted in this way.”

BESA deputy chief Bruce Kirton said: “Late payment puts companies out of business and drives up stress levels in an industry already dogged by serious mental health problems. It has been a source of frustration and fury in our sector for decades and, despite upwards of 20 government-backed ‘measures’ or voluntary ‘initiatives’ it continues to threaten the very existence of many SMEs.

“The government has launched yet another consultation on this issue, but the evidence is already overwhelming. Legislation that ensures retention monies are protected and used for the purpose for which they are intended is long overdue.”

Select managing director Newell McGuiness added: “Retentions remain a blight on the construction industry. Retention sums are often withheld for longer than necessary and are often not repaid in full if at all. It is vital that changes are made to protect businesses from this archaic practice.”

The three sector trade bodies have advocated that cash held in retentions by clients and main contractors should be held in trust at the earliest opportunity. This is mainly to help protect contractors from the risk of upstream insolvency.

The Building Engineering Business Survey received 341 responses from Select, ECA and BESA members during October.

Despite the findings on retentions, 81% or respondents said that their turnover had ‘increased or stayed the same’ during Q3, compared to the previous quarter.

The survey findings coincide with a government consultation on retentions in the construction industry, which is open until 19th January 2018. To find out more about the consultation, see: https://beisgovuk.citizenspace.com/im/retention-payments-in-the-construction-industry



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This article was published on 21 Nov 2017 (last updated on 21 Nov 2017).

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