Cash retentions in construction: Labour front bench says extent of abuse is “scandalous”

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Cash retentions in construction: Labour front bench says extent of abuse is “scandalous”

The Labour Front Bench Business Team has referred to the abuse linked to the practice of cash retentions in the construction industry as “scandalous”.

Speaking on behalf of the Labour Business Team, Bill Esterson MP said he was appalled by the statistics recently released as part of the research carried out by the Department for Business, Energy and Industrial Strategy:

“Over a three year period the industry – primarily SMEs – has lost £700 million worth of retention monies because of upstream insolvencies.  This works out at almost £20m per month, £4.5m per week and £900,000 per working day!”

He added:

“For an industry (that mainly comprises SMEs) to regularly haemorrhage this amount of cash is truly shocking.  It amounts to a massive drag on a key sector which, at the same time, is being encouraged by this Government to invest in cutting-edge digital and manufacturing technologies.”

Bill Esterson was speaking following the news that Peter Aldous MP has laid a Private Member’s Bill to require all cash retentions to be lodged in a retention deposit scheme.  The First Reading of this Bill will be on 9 January 2018.

Professor Rudi Klein, CEO of the Specialist Engineering Contractors’ (SEC) Group, which has been campaigning over many years for statutory protection of retention monies, said he was delighted with the emerging support from all parties for this measure.  He added:

“There is now a real urgency to address this issue in light of the precarious financial position of some of the top UK contractors.  If any one of these was to fail thousands of SMEs will lose their retentions and, in the process, many will not be able to survive.”

Professor Klein estimates that Carillion alone holds approximately £¼ billion of retentions which are either outstanding or due for release.

Trade organisations across the industry and their member firms are now speaking to their Members of Parliament to garner support for legislative action.

Notes for Editors

  1. SEC Group represents the following trade associations: British Constructional Steelwork Association, Building Engineering Services Association, ECA -‘Electrotechnical and engineering services trade body’, Lift and Escalator Industry Association, SELECT (Electrical Contractors Association of Scotland) and SNIPEF (Scottish and Northern Ireland Plumbing Employers’ Federation).  SEC Group represents the largest sector (by value) in the UK’s construction industry.
  2. Bill Esterson is the Labour MP for Sefton Central and Shadow International Trade Minister.
  3. Cash retentions are held back ostensibly as security in case a firm fails to return to remedy defects. But as the Government’s own research has revealed they are used to boost the working capital of the party deducting them.  The research was carried out by consultants, Pye Tait.
  4. A retention deposit scheme would reflect a model that is already in existence for tenancy deposits. Under the 2004 Housing Act deposits provided by shorthold tenants have to be deposited in a scheme authorised by government.
  5. 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: contact@secgroup.org.uk).
2017-12-19T18:37:10+00:00 19 December 2017|Articles, Press Statements|