Main contractors have called for the complete abolition of cash retentions in the construction industry by 2025.
Build UK, the Civil Engineering Contractors Association (CECA) and the Construction Products Association (CPA) have all called for retentions to be outlawed within seven years, urging the government to take swift legislative action.
The groups, which represent the industry’s biggest contractors and specialists as well as several major clients, said that Carillion’s collapse had made the need for action even more urgent.
Carillion, which was a member of both Build UK and CECA, is believed to have owed more than £800m in retentions when it went into liquidation.
Build UK chief executive Suzannah Nichol said: “The collapse of Carillion has reinforced the need for significant change in the construction industry, and we urge government to take legislative action to abolish cash retention.
“The industry is ready to support this by implementing a phased approach to zero retention, in partnership with government.”
The calls came as part of the group’s response to a government consultation on retentions, which closed last week.
In their response, the groups said zero cash retentions by 2025 would help change construction’s current business model and tackle the unsustainable margins seen across the industry.
They said the move would also increase working capital in the supply chain, provide incentives to improve the quality of completed works, and help ensure forms of security against defects were appropriate and proportionate.
The move follows similar efforts from the Building Engineering Services Association, the Electrical Contractors’ Association and the Specialist Engineering Contractors Group.
The trade bodies are currently trying to push through the Aldous Bill, which would make it illegal for clients and contractors to hold retentions directly and introduce a retention deposit scheme.
Build UK, CECA and the CPA said they recognised the need for alternative solutions to retentions and would support a retention deposit scheme if that was the approach the government chose.
CECA chief executive Alasdair Reisner said: “The use of improperly managed retentions by employers often has substantial impacts on SMEs further down the supply chain, as these companies operate within extremely tight margins and reserves.
“As a first step, we call on government to legislate to abolish cash retentions and work with industry to implement an agreed routemap-based approach to achieve this ambition.”