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Construction leaders say: It’s time to ensure action on retentions

The National Federation of Builders (NFB) and other trade federations with members most likely to be affected by the collapse of Carillion continue their push for action on retentions.

The SEC Group, The Electrical Contractors Association, Building Engineering Services Association, British Constructional Steelwork Association, Lift and Escalator Industry Association, National Association of Shopfitters, Scottish Building Federation, Electrical Contractors Association of Scotland and the Scottish and Northern Ireland Plumbing Employers’ Federation believe this is an opportunity for the industry to move swiftly where there is agreement.

We are delighted that clients, main contractors and their representative bodies are calling for an end to retentions by 2025. However, given that industry reports dating back decades have called for the complete abolition of retentions or the holding of retentions in trust, a little more urgency would have been welcome.

As they are now on board, we trust that they will give their full backing to the Construction (Retention Deposit Schemes) Bill 2018 introduced by Peter Aldous MP so that we, as an industry, can put an end to risking the £1 million lost each day to upstream insolvencies.

Richard Beresford, chief executive of the National Federation of Builders, said: “While there may be justifications for retentions, abuse across both the public and private sectors saps the supply chain of much-needed cash flow. This has a negative effect on the overall health of the construction industry.”

Vaughan Hart, managing director of Scottish Building Federation stated: “The size and scale of the insolvency of Carillion has brought the issue of retentions in the construction industry into sharp focus. However, it should be borne in mind that the majority of the retention monies withheld do not sit in the hands of main contractors, but remain with their clients. If retention monies have been released by the client on a project and not issued to the supply chain, this practice should be outlawed.

“The abolition of retentions is something that SBF would welcome, but in the absence of such an undertaking, the implementation of trust schemes for retention monies, or more significantly better rules governing the defect liability period and process, should be considered to ensure that the main contractor is held accountable to manage the defect rectification process in an efficient and timely manner. The supply chain must be afforded better protection.”   

SEC Group Chief Executive Rudi Klein said: “We must never be placed in a position again where thousands of firms have lost their retentions – monies they legally own – because of large insolvencies up the supply chain.”

With almost £1 billion in retentions being lost as a result of Carillion’s liquidation, we must not waste this opportunity to take what is a simple step to putting the entire supply chain – regional contractors, SMEs and specialists – on a more long-term sustainable footing and showing that the industry can work together.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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