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Main contractors call for retentions to be abolished by 2025

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.”

Readers' comments (8)

  • Contractors, Sub-Contractors and Suppliers must stop accepting Retentions on all new projects & officially supported by industry institutions as referenced above. The major clients will soon take note and Retention-less contracts will become the norm. Why should this take 7 years?? It needs to happen now.

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  • Yes the retentions need to stop...but the fact that the Main Contractors seemingly have this opinion is a joke...the majority of my consultant's work is recovering unpaid retentions for subcontractors.

    It is the Main Contractors that seemingly think that they can play the system and abuse it, holding onto retentions for longer than specified in theSubcontract and this can have a huge knock -n effect, especially when a Subcontractor has all of his eggs in one basket. Like those that had most of their eggs in the Carrillion basket and now cannot recover their retentions.

    Every week we find we are striking out clauses from subcontracts before our clients sign them whereby Main Contractors are still seeking to rely on 'pay-when certified' retention clauses over 7 years after the amended Construction Act.

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  • There is absolutely no good reason to wait 7 years; we have all been waiting long enough. This could be embedded in legislation within two years and in the meantime, "responsible" contractors could ensure voluntarily that all contracts from now are retention-less.

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  • Professor Rudi Klein, Barrister, heads up the Specialist Engineering Contractors’ (SEC) Group has some interesting views on this subject. this is a subject that rears its head fairly frequently and as the main problem is the abuse of the retention system and monies.

    It is very easily fixed by replacing actually withheld sums with a bank guarantee or bond. I have never known a Client or Main Contractor offered a BG or Bond in lieu of the retention (part of ones tender qualifications) to refuse the alternative especially when they are made aware of the saving.

    Perhaps we could encourage the writers/publishers of standard Forms to modify their documents to replace the standard wording with wording for retention BGs/Bonds

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  • Sorry should add.

    Bond is generally extinguished when bonded/guaranteed party presents taking over or final certificate. These instruments can be set up to increase with every application.

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  • Putting retentions in trust first, on the way to a full ban on retentions looks like an achievable path, but seven years to abolition is too slow.

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  • What stops Main Contractors doing this voluntarily now? Are they required to do this by law?

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  • 7 years - what a joke! This should happen now - there is no reason at all for them to hold on to a subcontractors money for sometimes 2 or 3 years. 5% on a million pound turnover represents £50,000 or £100,000 over 2 years, a huge sum that we giving main contractors interest free when it should be in our own bank accounts. This money is probably all that's keeping some of them going under. Should stop now.

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