Confederation of Construction Specialists calls for immediate abolishment of cash retentions

The UK government should not wait until 2025 to abolish the “outdated and detrimental practice” of cash retentions in the construction sector, according to the Confederation of Construction Specialists.

While applauding the intention of the Construction Products Association, CECA and Build UK, who are calling on the government to abolish the practice by 2025, the trade body said that it does not agree that waiting that long is warranted.

The Confederation said: “Abolishment of this outdated and detrimental practice should be immediate. Therefore, we call on the government to abolish retentions immediately and to introduce the appropriate legislation to do so.

“The retention issue has been ‘kicked further down the road’ for over 50 years and this needs to stop. The Banwell report (1962) recommended the abolition of retentions, the Latham report (1994) recommended that cash retentions should be protected in a trust account, and the government’s own Business Select Committees (2002 & 2008) recommended phasing out cash retentions. There are already alternatives available for cash retentions such as Retention Bonds, Performance Bonds and Sub-Contractors Collateral Warranties.

“Additionally, Project Bank Accounts (PBAs) are already being widely used on government projects to assure certainty and securement of payment. Therefore, making the use of PBAs on all suitable projects mandatory could be a first interim step to improve the industry’s payment culture.”

The specialist trade body highlighted a Cabinet Office Briefing document back in 2012, called Project Bank Accounts, in which the then Minister for the Cabinet Office, Francis Maude, said: “We are leading the way with this innovative approach to paying smaller suppliers, and where better to do so than in an industry where more than 99 per cent of businesses are SMEs. Project Bank Accounts means SMEs will be paid faster, freeing them of the burden of juggling with their cash and allowing them to focus on expanding their businesses instead of chasing payments.”

The document added: “PBAs not only assure certainty and security of payment; they also ensure that payment is made promptly. It is estimated that if fully implemented PBAs can deliver almost 1% savings in the cost of construction projects.”

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