Electrical Contractors’ Association

MP to bring forward Private Member’s Bill to ring-fence cash retentions

Peter Aldous MP

Peter Aldous MP

A backbench MP’s attempt to reform construction’s use of cash retentions has been backed by three industry associations.

Peter Aldous, Conservative MP for Waveney, has laid a Private Member’s Bill to protect the billions of pounds of cash retentions withheld from construction SMEs.

The Ten Minute Rule Bill 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 the House of Commons will be on 9th January 2018.

While such bills almost never reach the statute book, they offer an opportunity for backbench MPs to highlight issues of concern and apply pressure to government.

Mr Aldous has received backing from the Building Engineering Services Association (BESA) and the Electrical Contractors’ Association (ECA) and the Specialist Engineering Contractors’ Group (SEC).

Cash retentions are ostensibly withheld as security in case a firm fails to return to rectify non-compliant work. But research commissioned by the Department for Business, Energy & Industrial Strategy (BEIS) has revealed that the monies are primarily withheld to bolster the working capital of the party withholding them. Furthermore the practice gives rise to widespread abuse with the monies being withheld for three and more years.

The research revealed that over a three-year period £7.8 billion worth of retentions was outstanding.

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 SME’s nationwide.”

He added: “Over the past three years, £700m worth of retention payments to small businesses were lost due to the insolvency of a client, and if a small business suffers from an upstream insolvency of this kind, they are punished twice; firstly with the loss of work, and secondly with the loss of retention money. We therefore need action on this before more millions are lost.

“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, said the Bill had cross-party support.

He added: “I’m very grateful to Peter Aldous for initiating this. 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.”

ECA director Paul Reeve said: “This bill aims to protect the supply chain from the serious impact of lost retentions due to upstream insolvency. Way beyond those companies who are damaged by upstream insolvency, even the possibility of losing retention money in this way hampers small business investment and growth. As such, this bill is entirely consistent with the aims of the new industrial strategy, which looks for innovation and investment in skills”.

BESA legal and commercial director, Rob Driscoll, added: “To meet the challenges set by the recently launched industrial strategy and construction sector deal, enabling industry to re-invest in jobs, training, innovation and technological transformation, government intervention is necessary to secure working capital that underpins the delivery models for the industry as a whole.”

In April 2017 Scottish National Party MP Alan Brown laid a similar private member’s bill to protect cash retentions but it was overtaken by the general election.

New survey highlights growing importance of CSR in procurement process

corporate social responsibilityAlmost half of electrical contractors are now asked to provide evidence of corporate social responsibility (CSR) engagement as a condition of appointment by clients, a new survey has revealed.

Findings from a poll by the Electrical Contractors’ Association (ECA) and the Considerate Constructors Scheme revealed that 48% of buyer documents seen by electrotechnical businesses with turnover above £1 million now ask about engagement with CSR.

Just one in four (24%) said that no buyer document they had encountered had mentioned CSR. In addition, over half of businesses (53%) with turnover above £5m actively ask their own supply chain about their CSR policy and activity.

Three-quarters of businesses (76%) with turnover above £1m responded that they are actively engaged with CSR, and although 24% said that they don’t currently manage CSR, the majority of these businesses said they would consider doing so.

Over half of all respondents (53%) said they expect the importance of CSR to their organisation to grow in the next 5 -10 years. Just 10 per cent said they did not expect its importance to increase, with the remainder (37 per cent) unsure.

ECA director of business, Paul Reeve, said: “These ECA survey findings highlight the growing importance of CSR in procurement, and the significance which many businesses now place on ethical and responsible business practices.

“In addition to better company engagement with buyers and others, continual development in this area can help companies, and the industry within which they operate, to be more attractive to prospective employees.”

Considerate Constructors Scheme chief executive, Edward Hardy, added: “The ECA’s survey findings highlight the growing importance of CSR for all ECA members.

“The Considerate Constructors Scheme is in the prime position to support ECA members to embed CSR principles in relation to their important work they do across the construction industry, and we look forward to supporting more organisations to achieve this goal.”

The top five CSR issues identified by survey respondents were as follows: the environment (63%), occupational health and safety (55%), employee welfare (50%), ethical behaviour (43%), and supporting local initiatives (37%).

The ECA’s CSR survey was completed by around 150 ECA member businesses during April and May this year. Further survey findings will be released later this quarter.

Construction trade associations publish election manifesto wish lists

Houses-of-ParliamentTrade associations from the UK’s construction sector have put housebuilding, training and procurement reform at the forefront of their wish lists ahead of next month’s general election.

Publishing their respective election manifestos the lobby groups have detailed what commitments they would like to see from the major political parties.

In its Manifesto for the Built Environment supply chain, the Specialist Engineering Contractors’ Group (SEC Group) said a future government and parliament should commit to three-points for a world-leading UK specialist engineering supply chain in the built environment.

  1. Bring legislation to protect all retention monies in a ring-fenced account, as first step towards zero retentions by 2025, and prioritise review of the ‘Construction Act’. From 2021 all publicly-funded built environment work over £1 million should be paid using Project Bank Accounts. Payment security will guarantee a sustainable supply chain of SMEs.
  2. By 2022 all publicity-funded infrastructure and building works should adopt smarter procurement methods as a pre-condition to the availability of funding. Best models of practice in public procurement contracts will drive positive change across the industry.
  3. Establish a joint government/industry task group with a remit to develop proposals for a statutory licensing scheme for contracting companies. Building on current initiatives, incentivise the industry to aim for greater efficiency and best quality standards that will create a level-playing field for competition.

Professor Rudi Klein, SEC Group’s CEO, said that the challenge for the industry was to become leaner and fitter and government policy can be the catalyst for this change.

He added: “We urge all political parties to adopt these points in their business & industry policies as they are essential levers for economic growth and increased productivity.”

An engineering services manifesto has been launched by the Building Engineering Services Association (BESA) and the Electrical Contractors’ Association (ECA) which adds to a recent submission by the ECA and BESA on the government’s industrial strategy consultation.

The five-point manifesto calls for:

  1. Connecting the output of construction and operation of the UK’s built environment, and making it a strategic priority, to enable the sustainable delivery of economic, social and environmental benefits. Engineering services is uniquely positioned as a cornerstone of both sectors and has a central role in delivering these benefits throughout the lifetime of built assets, and, as a key enabler, should be selected by government for a ‘sector deal’.
  2. Ensuring that SME apprenticeship training is fully funded for the entire parliament. At present, there is significant concern that firms that are not required to pay the new apprenticeship levy may not be able to access the support they need to develop engineering and other technical skills.
  3. Ensuring government is a smart client and smaller businesses have stability of cash-flow and payment. A key request is for a digital payment platform in the public sector, linked to digital procurement processes. This would give greater transparency and speed to supply chain payment, and lower supplier risk.
  4. Making energy, heat and carbon efficiency a real sustainable delivery priority within the next parliament. Achievable energy efficiency goals, backed by government, need to be fulfilled if we are to meet our emissions reductions targets in the lowest cost way, as well as offering a way for businesses to improve their productivity.
  5. Improve productivity through action to enhance employee engagement. Government should introduce additional requirements in the procurement process to help mitigate against false self-employment and other tax avoidance schemes, and facilitate improved employer-worker collaboration, resulting in enhanced productivity.

ECA CEO Steve Bratt and BESA chief executive Paul McLaughlin said: “The next government has a great opportunity to deliver an investment and regulatory climate in which industry thrives and where buildings and infrastructure support UK growth and productivity.

“Our five-point manifesto would support business, by delivering highly skilled apprenticeships, giving SMEs the opportunity to grow, and ultimately, improving UK productivity.”

The National Home Improvement Council (NHIC) have launched its industry-led manifesto outlining five key areas it feels the next UK government should focus on alongside negotiating Britain’s departure from the European Union.

NHIC-5 Point Plan-rev0405The NHIC wants all political parties to clearly establish in their manifestos how they would work with industry to overcome some of the fundamental challenges currently faced by the country, including not only the need to build more quality energy efficient homes, but also how to improve the quality of our existing housing stock.

Anna Scothern, executive director of the NHIC, said: “Great Britain is one of the richest countries in the world, yet 4.5 million families still live in fuel poverty. The National Home Improvement Council believes that no individual or family should have to make ‘heat or eat’ choices each winter.”

She added: “27% of the UK’s CO2 emissions come from our existing 26 million homes and while demand for housing continues to rise with new house building failing year-on-year to meet the established government target of 1 million new homes by 2020, refurbishment, repair and maintenance must be an essential part of the new Government’s overall housing strategy.”

The Federation of Master Builders (FMB) also launched a five-point plan:

  1. Ensure that the construction industry has enough skilled workers
  • Introduce a flexible system of immigration that allows key strategic industries like construction to draw upon adequate levels of skilled labour from the EU and beyond.
  • Commit to increasing the quality, duration and thoroughness of apprenticeships and thus improve the image of vocational training so that we can attract more young people into our industry.
  1. Increase the supply of new homes
  • The UK government should commit to building at least 200,000 new homes per year in England and encourage the delivery of 25,000 new homes in Scotland; 14,000 in Wales; and 11,000 in Northern Ireland.
  • In England, continue to work with the house building industry to successfully implement key recommendations within the 2017 Housing White Paper that are designed to increase house building through SME builders.
  1. Improve the quality of new and existing homes
  • Introduce a mandatory warranty requirement for all domestic building works that require Building Regulations approval and structural engineering calculations.
  • Commission a review of new homes warranties to establish whether the warranties currently provided are adequate.
  1. Make homes more energy efficient
  • Reduce VAT on housing renovation and repair work from 20% to 5% to encourage refurbishment work, including energy efficiency measures.
  • Ensure that any government investment in reducing energy bills is targeted primarily at improving the energy efficiency of the UK’s homes.
  1. Boost growth among construction SMEs
  • Ensure that the overall regulatory burden on small businesses is reduced as part of the Brexit process.
  • Improve public procurement for construction SMEs and ensure local firms win a higher proportion of local authority contracts post-Brexit.