Construction suppliers call for action on retentions

Construction suppliers are urging the government to take action on late payments in the sector claiming it is harming investment, slowing completions and putting small firms under extreme financial pressure.

Conservative MP Peter Aldous is pushing for new legislation to protect suppliers in instances when building firms go bust.

It is not uncommon for the knock-on effects of insolvency to be felt down the supply chain, especially when finances are tied up in retentions.

These see a proportion of a bill held back as a form of security to ensure sub-contractors complete work to the expected standard.

However, it is claimed that larger construction firms have simply used them as a means of managing their own cash flow and that smaller firms therefore lose out on money they are owed as payments are deferred indefinitely.

The Specialist Engineering Contractor's Group (SECG) represents thousands of smaller firms and has claimed as much as £3 billion is being held in retentions in the UK.

Issues arise when retentions are held in regular bank accounts that do not include insolvency protection.

Some 44% of contractors have seen a portion of their bills not paid in the last three years as a result of insolvency in the supply chain, according to the Building Engineering Services Association (BESA).

Nearly 30 construction groups have backed proposals that will force building firms to keep retentions in separate accounts, therefore preventing it from being used to assist cash flow.

BESA policy co-coordinator Alexi Ozioro described the issue as nothing new and suggested that the industry is under more pressure to deliver a rising number of homes.

Meanwhile SECG chief Executive Rudi Klein has warned that the issue is hitting investment while it could also influence safety if firms cut corners in order to save finance.

Figures from the Department of Business, Energy and Industrial Strategy show that £700 million of cash retentions were lost in the construction industry in the last three years.

Research in late 2017 also suggested that UK construction firms were waiting longer for payments than several years previously.

By Phil Smith


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