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Minister: Retentions policy to change 'very soon'

Construction minister Richard Harrington has told day one of the Construction News Summit that the government will make an announcement on changes to retentions “very soon”.

Mr Harrington told the audience that the retentions system “was something very Victorian” that the government was looking to change.

The minister said he was aware of the split within the industry on the topic, citing those in favour of a complete ban; those that wanted retentions to remain; and the third that backed a ringfenced protection scheme as advocated by the Aldous Bill, which he referred to as “the escrow solution” and hinted at being his favoured solution.

“One thing the industry and government has to deal with is retentions,” he said.

“We’re trying to act in a way […] that doesn’t completely alienate one of the different interest groups.”

He added: “It’s easy to ban, but that would have devastating consequences.”

Mr Harrington said he felt “the escrow solution would, on the face of it, stop the Carillion situation” in terms of supplier payments being lost, but he added that the costs and administration involved could pose a challenge.

“We hope to announce a new [retentions] policy very soon,” he added.

CN Smmit: All the news and views

Follow the two-day #CNSummit on Twitter and look out for further news and reaction.

The minister also told the CN Summit that the government was looking to legislate on late payments, but that the government needed to ensure it was paying customers on time.

“Something festering underneath is late payments,” he said.

“We don’t want a sledgehammer to crack a nut; the government has to lead by example.

“We will have to legislate; we don’t want to make law after law, but sometimes we have to act.”

Addressing Brexit, Mr Harrington revealed construction was one of the primary models used in Cabinet to illustrate the benefits of Theresa May’s proposed deal, which he had worked with industry leaders to devise.

The minister said he believed the key areas for construction were frictionless trade for materials and movement of labour.

Mr Harrington argued that Mrs May’s proposed deal tackled the issue of frictionless trade, though acknowledged that the plans would see an “end of free movement of labour”.

This, the minister said, was “not a question of drawbridges going up, because we have skills shortages all over the UK”.

The new immigration system would instead be “blind to where people were coming from”, although he expected that the majority of those entering through the new regime would be from countries closer to the UK.

“The main damage to the industry [from Brexit] is uncertainty,” he said.

“There are a lot of projects on hold because contractors are waiting to know what the environment is going to be.

“This is another reason why I support the PM’s deal, it is a compromise.”

Readers' comments (2)

  • The worst organisations by far for abusing retention funds are govermental organisations. Its hypocritical of the Minister to preach to the industry regarding this. The Goverment should show an example by banning all retentions from Government bodies to contractors. The industry might thereafter regard them more credibly.

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  • Paul Brightey

    Changing the rules on Retentions is only part of the story. Make the rules regarding withholding of retention less onerous, and the payment terms will be hardened to compensate. Only holistic root and branch changes to construction contracts affecting payment periods, retentions, the softening of machiavellian and tortuous requirements demanded for an application for payment to be deemed compliant, and the outlawing of the unethical use of the T&Cs regarding contra charges will make a start. I recently came upon a new clause never seen before, whereby our employer could revise the contractual due date at any time and for any reason. It goes without saying that this would give licence to move it forward (thereby making your already issued application for payment effectively late and non-compliant), or move it back (thereby extending agreed payment periods - every month in theory). This unethical culture has infiltrated the industry the last 20 years ever since litigation lawyers were commissioned to undermine the HGCR Act. The outcome is we see many now highly skilled at managing risk/exposure, but rarely capable of managing the works.

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