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Construction cash retention bill gets industry backing

BESA and ECA pledge backing to proposed legislation that would require cash retentions to be held by third party trust to protect against supply chain insolvency

A new bill to be introduced to parliament that sets out new rules for managing cash retentions is being backed by a number of industry bodies such as BESA and electrical and engineering services group ECA.

Conservative MP Peter Aldous is seeking to use the parliamentary procedure of the Ten Minute Rule Bill to enact changes to the 1996 Construction Act that would require cash retentions to be held in a third party trust scheme. A first reading of the bill in parliament is scheduled for January 9.

The introduction comes amidst broader industry concern about how funds are being retained from payments owed to contractors to ensure the completion of work deemed to be non-complaint.

Recent research from consultants Pye Tait that was commissioned by the Department of Business, Energy & Industrial Strategy (BEIS) concluded that £700m in construction cash retentions has been lost over a three-year period due to insolvencies.

The introduction of a new bill seeking to overhaul cash retention management comes at the same time as a government consultation on holding of some funds from construction contracts.  Responses to the consultation will be accepted up until January 19.

 BESA legal and commercial director Rob Driscoll said that reforming retentions would be a vital component to realising the aims of the government’s revamped Industrial Strategy.

He said, “To meet the challenges set by the recently launched Industrial Strategy and construction sector deal, enabling industry to re-invest in jobs, training, innovation and technological transformation, government intervention is necessary to secure working capital that underpins the delivery models for the industry as a whole.”

ECA business and external affairs director Paul Reeve said the bill was intended to protect the construction industry, particularly in the case of smaller business, from upstream insolvency.

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