UK: Collapsed construction firm Carillion could be holding over £800m in retentions payments owed to sub-contractors, according to the Building Engineering Services Association (BESA).
The amounts revealed in the company’s most recent financial figures have spread alarm amongst SMEs that much of this money will be lost, leaving many more firms at risk of financial collapse.
Just last week, Peter Aldous MP introduced a draft bill seeking to amend the 1996 Construction Act to ensure retention money is held in a deposit protection scheme – avoiding just this kind of situation.
“The Bill was developed precisely with just this kind of nightmare scenario in mind,” said BESA president Tim Hopkinson. “We are aware of the frantic attempts going on behind the scenes to rescue Carillion’s projects and switch them to other contractors, but unless retention money is protected – there is a danger that the problem is just being moved to another place and that SMEs will remain equally vulnerable,” he added.
In addition to calling on the UK government to actively support the Peter Aldous Bill, BESA and the Electrical Contractors’ Association are asking that any SME contractors already working on Carillion projects should be allowed to continue on these projects and be paid directly.
They also demand that major public sector suppliers like Carillion should be precluded from winning any further contracts unless it can prove it pays its supply chain promptly. They also insist that government must monitor and enforce the public sector 30-day payment supply chain model as opposed to Carillion’s own 126-day payment terms.
“Well run businesses are being starved of vital working capital and put at risk of insolvency through no fault of their own,” added Tim Hopkinson. “It is time for the abuse of the retentions system to end and for sub-contractors’ hard earned money to be protected from this kind of supply chain failure.”
Carillion forced into liquidation – 15 January 2018
UK: The building services industry is in turmoil after the compulsory liquidation of construction giant Carillion with debts of around £900m. Read more…
Labour front bench appalled at retentions – 18 December 2017
UK: The Labour Front Bench Business Team has referred to the abuse linked to the practice of cash retentions in the construction industry as “scandalous”. Read more…
Majority of SMEs hit with retentions – 20 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 losses – 7 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…