Construction retentions bill published

Rudi Klein

The Construction (Retention Deposit Schemes) Bill has been published against the background of crippling retention losses caused by the collapse of Carillion.

Published in time for its Second Reading on Friday, the bill stipulates that, unless the monies are protected, any clause in a construction contract enabling the deduction of cash retentions, will be invalid.

According to research carried out for the Department for Business, Energy and Industrial Strategy, £700 million worth of cash retentions was lost by firms over a three-year period as a result of upstream insolvencies.

As a result of the bill, which will apply to the whole of the UK, cash retentions will have to be safeguarded within a retention deposit scheme.

The rules for establishing and operating retention deposit schemes will be contained in secondary legislation. Such schemes may simply provide a ‘custodial’ service to ring-fence the monies or, instead, could provide insurance-backed alternatives. Schemes would be expected to provide quick and inexpensive adjudication or mediation procedures to resolve any disputes holding up release of the monies.

Introduced as a Private Member’s Bill by Peter Aldous MP at its First Reading in January 2018, the bill is the latest in a series of attempts made over many years by the Specialist Engineering Contractors’ Group (SEC Group) to overcome the abuse associated with the practice of retentions in the construction industry.

Speaking on behalf of SEC Group, CEO Professor Rudi Klein said that as much as three quarters worth of retention monies could be contained within the £7 billion of Carillion’s liabilities.

He added: “We know that ministers are sympathetic towards the bill but, at this stage, the government must issue a robust public statement of support for the bill.”

The bill is supported by 80 organisations connected with the construction industry. If it passes its Second Reading it will go to Committee Stage for a detailed consideration of its provisions.

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