Research carried out by consultants Pye Tait for the Department of Business, Energy & Industrial Strategy (BEIS) has revealed almost £700 million worth of cash retention has been lost in construction by reason of insolvencies. This figure relates to 3 years and reflects 2016 prices (when Pye Tait carried out its survey).
The Specialist Engineering Contractors’ (SEC) Group has described the figure as “shocking” and far in excess of its own estimates.
SEC Group’s CEO Rudi Klein said that this vast sum, without more, justified legislation to ring-fence retention monies:
“The bulk of these monies will have been lost by SMEs. They legally belong to the firms from whom the monies were withheld; consent to the withholding of the monies did not extend to their being used to pay off the insolvent party’s creditors. This represents a scandalous and continuing drain on the scarce resources of SMEs in the construction industry.”
SEC Group – which represents the largest sector in the construction industry (by value) – has been campaigning for all cash retentions to be deposited with independently run retention deposit schemes.
Rudi Klein added:
“Given the dire finances of some of the UK’s largest construction companies it is even more urgent that Parliamentary time is secured for legislation to protect retention monies.”
Notes for Editors
- SEC Group represents the following trade associations: British Constructional Steelwork Association, Building Engineering Services Association, ECA, Lift and Escalator Industry Association, SELECT (Electrical Contractors Association of Scotland) and SNIPEF (Scottish and Northern Ireland Plumbing Employers’ Federation).
- Cash retentions are an age-old practice in the construction industry. They are deducted from due payments ostensibly as security in the event that a firm does not return to correct non-complying work. In practice they are deducted to bolster the working capital of the other party.
- BEIS is currently consulting on whether cash retentions should be lodged in a statutory retention deposit scheme.
- For further information please contact Rudi Klein on 07767 412 903 (email: Klein@secgroup.org.uk or Maria Balermpa, SEC Group Operations and Public Affairs Manager on 07508 559 231 (email: email@example.com).