SNP MP Stuart C. McDonald has urged the Government to reveal how they are going to deal with cash retentions, an issue affecting the livelihood of small firms in the construction industry.
The Member for Cumbernauld, Kilsyth and Kirkintilloch East yesterday (27/06/2017) questioned the Department of Business Energy and Industrial Strategy: “What the Government’s policy is on the non-release or late release of cash retentions in the construction industry”. His question was also echoed by Labour MP for Chesterfield, Toby Perkins.
BEIS Minister for Small Business Margot James MP was quick to assure that the Government’s long overdue review on Retentions will be published shortly and will consider, together with Construction Act review, actions, including ring-fencing of retentions; she said:
“Unjustified late and non-payment of a retention payment or any amount owed is unacceptable. These practices cause particular problems for small businesses in the construction sector, and the Government are committed to tackling them.”
Prior to the latest election, his colleague Alan Brown MP urged the Government to provide a solution to this outdated practice specific to the construction industry:
“…The problem has been known about for around 50 years, and I was able to get cross-party support for a private Member’s Bill on the issue in the previous Parliament. I even had support from the DUP, so perhaps it really is something that should be brought to the table. If we want to increase productivity and have more efficient infrastructure, it really would be an easy start.”
Cash retentions involve holding back monies from due payments ostensibly as security in case a firm does not return to rectify defects. In reality the system is regularly abused. The money is used to bolster the cashflow of the party deducting it and in many cases the money is released years after completion of the work or not at all.
In February, the Specialist Engineering Contractors’ (SEC) Group revealed that over £1bn cash retentions are held by UK top construction companies from their SME sub-contractors.
Speaking on behalf of the SEC Group, CEO Rudi Klein said that there has been tremendous support from both Houses in Westminster on this issue which, he added:
“After many years of SEC Group campaigning on this issue it seems that we are now making progress towards protecting cash retentions. This has to be the road map to enabling construction SMEs to grow and innovate.”
- 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).
- Approximately £3 billion worth of retention monies are withheld at any one time. The monies withheld often represent firms’ profit margins.
- In March this year legislation in New Zealand will require that all retention monies are held in trust until due for release.
- On 26 April 2017, Alan Brown MP for Kilmarnock and Loudoun introduced a Bill to ring-fence retentions in a secure account.
- For further information please contact Professor Rudi Klein (email: Klein@secgroup.org.uk mobile: 07767 412 903) or Maria Balermpa, SEC Group’s Operations and Public Affairs Manager, (email: firstname.lastname@example.org mobile: 07508 559 231).