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Bill seeks to protect retentions

UK: Contractors’ group BESA has backed a bill seeking to ensure that retentions in the construction industry are held in trust.

The Ten Minute Rule Bill, to be introduced by conservative MP for Waveney Peter Aldous, will seek to amend the 1996 Construction Act and ensure that retentions within construction are held in a third party trust scheme. A key aim will be to help protect companies in the construction supply chain from insolvency and payment uncertainly. The first reading of the Bill in Parliament will be on January 9.

It is backed by the Building Engineering Services Association (BESA) and the electrotechnical and engineering services body ECA. Both the ECA and BESA anticipate significant additional political and industry support for the Bill. 

Peter Aldous said that he was concerned about the impact on SMEs: “I have been aware of retentions as an issue for a while, and with construction being a tough industry and uncertainty surrounding many aspects of the economy, small businesses need as much support as possible. There are a number of specialist engineering firms in Waveney, and what this Bill aims to do is to protect them and their livelihoods as well as 280,000 other construction SMEs nationwide.

SMEs are the backbone of the UK economy, which is why they need support and protection. This Bill is not about abolishing payment retentions; it is about making sure that people’s money is safe so that businesses can grow and invest in their future.”

Professor Rudi Klein, the CEO of the Specialist Engineering Contractors’ Group, commented: “All that is required is mutuality of security.  If cash retentions are required as a form of security, there must also be security for the cash as exists in many other countries around the world.”

Recent research by Pye Tait on retentions has shown that over £700m worth of retention money has been lost due to upstream insolvency in the past three years and that on average £27,500 is held in retention per contractor. In an industry of 280,000 SMEs, 44% of contractors have suffered non-payment through upstream insolvency in the last three years.

The Bill will be introduced while the government consults over reforming the current retentions model. The government consultation runs until 19 January 2018.

Related stories:

Majority of SMEs hit with retentions20 November 2017
UK: A majority of engineering services businesses say that a substantial portion of their turnover is currently being held by firms up the supply chain. Read more…

BESA/ECA: “hold retentions in trust”29 October 2017
UK: Two of the UK’s leading building sub-contractor groups have told a new government enquiry that retentions should be held in trust. Read more…

Insolvency sparks £700m retention losses7 November 2017
UK: Insolvencies in construction have led to “shocking” cash retention losses of £700m over the last three years, the Specialist Engineering Contractors’ (SEC) Group claims. Read more…

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