Government is “betraying” small firms

UK: The government has been accused of betraying small contractors over withheld retention monies, with public sector clients among the worst culprits.

Writing on the Building & Engineering Services (B&ES) website, B&ES president Jim Marner claims that an estimated £30m of small firms’ money has gone west in retained payments already this year.

Referring to the latest report from the Specialist Engineering Contractors’ (SEC) Group, Jim Marner says: “It has become common practice for many local authorities to hang onto specialist contractors’ money in order to fund other projects, with retentions – often as much as 10% of the invoiced amount – regularly withheld until four years after the project is completed.”  And he accuses public sector clients as being among the worst culprits.

“In any other walk of life this would be a huge scandal with lurid headlines proclaiming fraud and theft. In construction, it seems it is accepted as a fact of life with small companies expected to act as bankers to much larger organisations,” he writes.

In spite of this, secretary of state for business, innovation and skills Sajid Javid is said to have told the SEC Group that, although he was aware of the problem, there were “no plans” for legislation to tackle the issue, instead promising to “continue to work with stakeholders to promote fair payment in construction”.

Claiming that the situation is threatening the existence of thousands of small UK businesses, Jim Marner describes it as “completely unacceptable and a massive betrayal of small business.”

“Also,” he writes, “Mr Javid seems to be missing the point that if many more specialist firms go under, the government will simply be unable to deliver on many of its ambitious infrastructure plans. It won’t have the skills or resources available.”

Solution

The SEC Group, of which B&ES is a member, has long been proposing for retention money to be placed ‘in trust’ so it cannot be unfairly withheld and can be released in the event of an insolvency upstream that could threaten the whole supply chain.

B&ES has also been lobbying for digital online payment to be imposed across construction to improve transparency and ease the flow of money through the supply chain.

“It is not as if we are asking for anything more than we deserve. Small firms need to be paid fairly and on time – something businesses in other sectors take for granted,” says Jim Marner.