Construction industry organisations have welcomed efforts by late payment campaigner Debbie Abrahams, MP for Oldham East and Saddleworth, to tackle the issue of “hated” cash retentions.
During the third reading of amendments to the Small Business, Enterprise and Employment Bill, Ms Abrahams said: “At any one time, over £3bn is outstanding in the construction industry by way of cash retentions.
“I have several examples, including that of a company that wrote to me to say that £60,000 of retention money was withheld – 5% of the overall contract – for eight months. There was nothing in the contract about that. They had to go through adjudication and it ended up with them losing £22,000. These are small businesses, and this is their livelihood.”
Ms Abrahams said there was evidence that cash retentions had been used to shore up the working capital of local authorities and tier 1 suppliers.
She argued there was a key concern that if tier 1 suppliers became insolvent, the small businesses in the supply chain were at risk of losing their retentions.
“I recognise that the Department for Business, Innovation & Skills has said in its construction supply chain payment charter that it wishes to abolish retentions by 2025,” Ms Abrahams continued.
“My new clause, however, is a stepping stone towards that, by requiring the publication of companies’ policies, practices and performance on retention moneys, reviewing this and subsequently making recommendations about further action to help secure and protect retention moneys for small businesses - in trusts, for example.”
Responding on behalf of the Government, small business minister Matthew Hancock said: “We are working with industry to move to a position where retentions are no longer necessary, and I would be happy to work with the opposition members to push that further.”
In response to Ms Abrahams’ speech, chief executive of the Specialist Engineering Contractors’ Group professor Rudi Klein said he was very grateful for her support: “This is the first time the issue of cash retentions has ever been debated in the Commons, and Debbie Abrahams has now obtained a commitment from the government to pursue this issue with the opposition.
“But we shall keep up the pressure. The best way to get rid of this much hated, unfair and outdated practice of retentions in the construction industry is to put them out of reach of those withholding them by putting them into trust.”