Scottish National Party (SNP) MP Stuart C. McDonald has urged the Government to reveal how they are going to deal with cash retentions, an issue affecting the livelihood of small firms in the construction industry.
The MP for Cumbernauld, Kilsyth and Kirkintilloch East questioned the Department of Business Energy and Industrial Strategy (BEIS) over what the Government’s policy is on “the non-release or late release of cash retentions in the construction industry.” His question was also echoed by Labour MP for Chesterfield, Toby Perkins.
BEIS Minister for Small Business Rt Hon Margot James MP was quick to assure that the Government’s long overdue review on retentions will be published shortly and will consider, together with the Construction Act review, actions including the ring-fencing of retentions. She commented: “Unjustified late and non-payment of a retention payment or any amount owed is unacceptable. These practices cause particular problems for small businesses in the construction sector, and the Government is committed to tackling them.”
Prior to the latest election, Alan Brown MP urged the Government to provide a solution to this outdated practice specific to the construction industry. Mr Brown said: “The problem has been known about for around 50 years, and I was able to get cross-party support for a private Member’s Bill on the issue in the previous Parliament. I even had support from the DUP, so perhaps it really is something that should be brought to the table. If we want to increase productivity and have more efficient infrastructure, it really would be an easy start.”
Cash retentions involve holding back monies from due payments, ostensibly as security in case a firm does not return to rectify defects. In reality, the system is regularly abused. The money is used to bolster the cash flow of the party deducting it and, in many cases, the money is released years after completion of the work or not at all.
In February, the Specialist Engineering Contractors’ (SEC) Group revealed that over £1 billion in cash retentions are held by UK top construction companies from their SME sub-contractors.
Speaking on behalf of the SEC Group, chief executive Rudi Klein said that there has been tremendous support from both Houses in Westminster on this issue. He added: “After many years of SEC Group campaigning on this issue it seems that we are now making progress towards protecting cash retentions. This has to be the road map to enabling construction SMEs to grow and innovate.”