INDUSTRY URGED TO ADVISE GOVERNMENT ON A STATUTORY SOLUTION TO RING-FENCE CASH RETENTIONS
Posted by: electime 25th October 2017
SEC Group has welcomed the publication of the independent review on cash retentions in the Construction Industry. The review was commissioned by Government following an amendment to the Enterprise Bill laid by Lord Aberdare in 2015 and drafted with help by SEC Group.
An estimated £7.8 billion of retentions has been unpaid across the construction sector over the last three years. The review confirms that retention monies lost to the industry due to contractor insolvencies are of great value – SEC Group estimates this to be £40m each year.
SEC Group has highlighted the abuse of cash retentions which occurs in the industry at the financial detriment of the construction supply chain. The review confirms that:
- Delays in paying retention monies are commonplace in the construction sector.
- Currently there is no protection for sub-contractors from upstream insolvencies, as retention monies held against their work are not ring-fenced; multiple contractors within the supply chain could be affected by insolvency of one large main contractor or client.
SEC Group said this is affecting the livelihoods of many SMEs in the construction industry, and we welcome the Government’s commitment to address the issue of cash retentions with the launch of today’s consultation.
SEC Group will stress that for any solution to be effective, it should include protection of cash retentions within a statutory framework. This already exists in other countries such as Canada, Australia and New Zealand.
It will now look to examine and respond to all the solutions proposed through the consultation and we are particularly pleased that the option for a deposit scheme is included as one of the possible mechanisms.
It will also press upon Government that this issue of protecting cash retentions should now be an urgent priority given the current financial instability in the industry.
SEC Group is now urging every company in the industry to respond to this consultation by 19th January 2018.
