Scottish 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 Scottish construction and those south of the border.
The Member who represents the constituency of Cumbernauld, Kilsyth and Kirkintilloch East yesterday (27/06//2017) posed the following question to the Secretary of State for 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”.
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to the recent Westminster election, his colleague Alan Brown MP had urged the Government to provide a solution to this outdated practice specific to the construction industry: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 in many cases not at all.
Speaking on behalf of the SEC Group (Scotland) Alan Wilson said that there had been tremendous support from SNP Westminster MPs on this issue. He added:
“Cash retentions often represent the profit margins of thousands for small firms in Scottish construction but it is not unusual for them to give up chasing outstanding retentions monies”.
Notes to Editors
- SEC Group Scotland represents the following trade associations in Scottish construction: British Constructional Steelwork Association, Building Engineering Services Association, 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 Alan Wilson, SEC Group Scotland National Executive Office on mobile 07825 248 423; email: email@example.com