Retention bill gets construction sector backing
Several industry associations have backed an MP's proposals to reform how the construction sector uses cash retentions.
While Peter Aldous' Ten Minute Rule Bill is unlikely to become law, it will showcase the issue to government when it is presented to the House of Commons in early January.
He is seeking to reform the 1996 Construction Act so that retention fees are kept and protected in third party trust schemes.
The move comes as millions of pounds are withheld in cash retentions from construction firms along the supply chain, which is putting great pressure on the cash flows of many smaller companies.
The Government is already consulting on the issue, but now the new Bill also has support from the Specialist Engineering Contractor's Group (SEC), the Building Engineering Services Association (BESA) and the Electrical Contractors Association (ECA).
An estimated £7.8 billion of retentions were owed across a three-year period according to research from the Department for Business, Energy and Industrial Strategy.
Mr Aldous, MP for Waveney, said he aims to protect more than 280,000 construction firms across the UK at a time when he says SMEs need 'as much help as possible'.
Given the economic uncertainty surrounding Brexit negotiations, many small construction firms have held back or lost work entirely, while the loss of retention funds can cause further issues.
Around £700 million of retention payments to small construction firms was lost in the last three years due to insolvency further up the supply chain.
Protecting that finance is therefore a priority for those in the construction sector as it enables smaller firms to invest and grow their operations.
Just the risk factor of losing retention money can inhibit expansion plans, according to ECA Director Paul Reeve, who described the bill as being 'entirely consistent with the aims of the new industrial strategy'.
For businesses fearing that their financial position could worsen, contingency planning can help to ensure that there are options available should that occur.
This should mean that business owners and directors can find the best outcomes for their businesses by using a diverse range of strategies.
By Phil Smith