Industry calls on Govt to abolish retentions
January 2018

Build UK, the Civil Engineering Contractors Association (CECA), and the Construction Products Association (CPA), are calling on Government to abolish the practice of retention in the construction industry.

The joint call comes in response to the Government consultation on the Practice of Cash Retention under Construction Contracts. The organisations make the case for a joint approach of Government legislation to abolish retention, supported by the industry developing and implementing a phased roadmap, as the only way to achieve the cultural change needed on this issue.

Cash retention – the withholding of a percentage of payment on construction work until it is certified as having been completed free of defects – is problematic for all parties with a significant impact upon cash flow and working capital throughout the supply chain, say the organisations.

A statement continues: “These issues have been brought into stark focus this week with Carillion going into liquidation, leaving an estimated 30,000 creditors, which are predominately small and medium-sized businesses. It is also estimated that Carillion held £800 million of retention payments on entering liquidation. In order to deliver the UK’s ambitious infrastructure, housing and commercial needs, the way construction projects are designed, procured, delivered and operated needs to be transformed.

“The current business model requires change with operating margins unsustainable for the level of risk that companies are taking on. The industry is fully committed to achieving zero cash retention and we believe that Government must introduce legislation to ensure there is zero cash retention within the industry by no later than 2025.”