Proposed parliamentary legislation designed ‘to dramatically reform the controversial practice of payment retentions in the construction industry’ was formally unveiled at a House of Commons briefing today, 8 January.
The Bill, being introduced under the ‘Ten Minute Rule’ by Peter Aldous MP, will have its first reading in parliament on 9 January, and has attracted cross-party support with the full permitted complement of 12 ‘sponsoring’ MPs, including Sir Henry Bellingham (Conservative); Barry Sheerman (Labour), Caroline Lucas (Green Party), and Alan Brown (SNP).
The ‘Aldous Bill’ seeks to amend the 1996 Construction Act to ensure that retention money is held in a deposit protection scheme – thus ending the issue of upstream insolvency and the working capital it takes from the industry and SMEs. According to the Building Engineering Services Association (BESA) and the electronical and engineering services trade body, the ECA, which co-developed the Bill in conjunction with the MP, the average UK contractor has £27,500 withheld per year in retentions, which the organisations say ‘limits their ability to invest in apprentices, upskill existing employees, and improve productivity and quality’.
At the Westminster briefing, Peter Aldous, along with a number of other sponsoring MPs, briefed the national and trade media about the contents of the Bill and explained the background, including the fact that more than £10.5 bn of SMEs’ potential working capital is ‘locked up in retentions every year’, and £7.8bn was unpaid in the last three years.
The BESA and ECA point out that the Bill – which is also supported by the Federation of Master Builders (FMB), the Specialist Engineering Contractors’ (SEC) Group, and more than 20 other trade bodies – does not seek to abolish retentions, but rather ‘to address the fact that this money is not protected from upstream insolvencies’, which they say led to £700 m being entirely lost to SMEs in the same three-year period. ‘This amounts to £20m a month, £4.5m a week, or £640,000 per day’.
“This Bill provides a solution that will help all parties involved in construction by stabilising and securing cash-flow – including main contractors and clients,” said BESA’s Legal and Commercial director, Rob Driscoll. The fact that it has attracted support from right across the House proves that politicians recognise that SMEs are the lifeblood of construction and FM. They represent a £212 bn economic contribution, and their delivery enables a further £597 bn worth of economic output. This is not an isolated issue. It goes right to the heart of the government’s attempts to improve industrial productivity throughout the UK economy. Securing this cash would unlock the supply chain, enable growth, training, and technological evolution, allowing the construction sector to step up its efforts to deliver vital infrastructure and housing projects.”
“The growing contrast between the push for a modern, digital, and productive construction industry, and the everyday reality for exposed supply chains is staggering,” added ECA director of Business Paul Reeve. “We must change the retentions system as soon as possible, to protect supply chains. Small businesses can only be the engine room for construction growth and innovation if they can invest with confidence. That means retention monies should be put in trust at the earliest opportunity, and ECA urges the industry to support the Bill being put forward to achieve this.”
BESA calculated that the amount withheld in retentions would enable the recruitment of around 3,000 new apprentices in the building engineering sector alone if it was released to the supply chain.
When asked what they would do with retention money if it wasn’t withheld or lost, 48% of contractors told a recent survey carried out on behalf of the Department of Business, Energy & Industrial Strategy (BEIS) they would invest in new equipment and facilities. 40% would look to take on more work, 29% would employ more apprentices, and 22% would allocate the money to taking on their first apprentice.
