Industry urged to advise government on statutory solution to ring-fence cash retentions

crane-stockThe Specialist Engineering Contractors’ Group (SEC Group) has welcomed the publication of the independent review on cash retentions in the construction industry.

The review was commissioned by the UK government following an amendment to the Enterprise Bill laid by Lord Aberdare in 2015 and drafted with help by SEC Group.

An estimated £7.8 billion of retentions has been unpaid across the construction sector over the last three years. The review confirms that retention monies lost to the industry due to contractor insolvencies are of great value - SEC Group estimates this to be £40 million each year.

SEC Group has highlighted the abuse of cash retentions which occurs in the industry at the financial detriment of the construction supply chain.

The review confirms that:

  • Delays in paying retention monies are commonplace in the construction sector
  • Currently there is no protection for sub-contractors from upstream insolvencies, as retention monies held against their work are not ring-fenced; multiple contractors within the supply chain could be affected by insolvency of one large main contractor or client.

  • SEC Group said this is affecting the livelihoods of many SMEs in the construction industry, and has welcomed the government’s commitment to address the issue of cash retentions following the launch of a new consultation.

    The construction representative body said it will stress that for any solution to be effective, it should include protection of cash retentions within a statutory framework, similar to those which already exist in other countries such as Canada, Australia and New Zealand.

    SEC Group said: “We will examine and respond to all the solutions proposed through the consultation and we are particularly pleased that the option for a deposit scheme is included as one of the possible mechanisms.

    “We will be pressing upon government that this issue of protecting cash retentions should now be an urgent priority given the current financial instability in the industry.

    “We are urging every company in the industry to respond to this consultation by 19th January 2018.”

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