‘Hated’ cash retentions highlighted in Commons debate

Construction industry organisations have welcomed my efforts by to tackle the issue of ‘hated’ cash retentions* during the third reading of amendments to the Small Business, Enterprise and Employment Bill.

At any one time over £3 billion is outstanding in the construction industry by way of cash retentions.

I have several examples, including that of a company that wrote to me to say that £60,000 of retention moneys was withheld—5% of the overall contract—for eight months. There was nothing in the contract about that. They had to go through adjudication and it ended up with them losing £22,000. These are small businesses, and this is their livelihood.

There is evidence that cash retentions have been used to shore up the working capital of local authorities and tier 1 suppliers. There is a key concern that if tier 1 suppliers become insolvent, the small businesses in the supply chain are at risk of losing their retentions.

I recognise that the Department for Business, Innovation and Skills has said in its construction supply chain payment charter that it wishes to abolish retentions by 2025.

My new clause, however, is a stepping-stone towards that, by requiring the publication of companies’ policies, practices and performance on retention moneys, reviewing this and subsequently making recommendations about further action to help secure and protect retention moneys for small businesses – in trusts, for example.

Responding on behalf of the Government, Small Business Minister, Matthew Hancock said that the Government are working with industry to move to a position where retentions are no longer necessary, a would be happy to work with the Opposition Members to push that further.

In response, the Chief Executive of the Specialist Engineering Contractors’ (SEC) Group, Professor Rudi Klein, has said that this is the first time the issue of cash retentions has ever been debated in the Commons and expressed his gratitude to me for my support in obtaining a commitment from the Government to pursue this issue with the Opposition.

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