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Time for Change campaign relaunched to continue fighting unfair practice of cash retentions

Over the past few months, H&V News has been campaigning against long-established barriers impeding the growth of firms in the building services sector. 

Prompted by readers such as Martin Burton of Delron Services, and supported by the Specialist Engineering Contractors’ Group and the Building and Engineering Services Association and many other organisations, the Time for Change campaign has highlighted the problems of cashflow faced by small and medium-sized enterprises (SMEs) in our sector.

In particular, we have focused on the unjust practice of cash retentions. 

In the past year New Zealand and the Australian state of New South Wales have legislated to protect cash retentions from upstream insolvencies.

Last November H&V News backed an amendment to the Small Business, Enterprise and Employment Act 2015 to require that all cash retentions be placed in trust. 

The amendment was introduced by fair payment campaigner Debbie Abrahams MP, who also received the Gold Award at the H&V News Awards dinner in April.

A refined version of the amendment was considered by the House of Lords at the beginning of the year.

It was opposed by the coalition government for reasons that were not clear.  Part of the problem was the poor briefing given to business minister Baroness Neville-Rolfe in the House of Lords. 

We now have a chance to have another go. Today (Wednesday 27 May) there was the announcement of a new Enterprise Bill in the Queen’s Speech. 

This will introduce a small business conciliation service to deal with payment disputes, which could provide an opportunity to re-introduce the trust requirement for cash retentions. 

To pursue this we urge readers to contact their MPs to seek their support.

A suggested approach

Dear [MP’s name],

CASH RETENTIONS

My business operates within the building services sector of the construction industry. The purpose of writing is to bring to your attention the long-standing practice of cash retentions.

Payments to ourselves are regularly subject to a 5% cash retention – and sometimes more. Although this retention is deducted from monies we have already earned, we never obtain release of the monies until two or more years have passed since handover of our work. Over the years we have lost retention monies because of the insolvency of the paying party.

Ostensibly, retentions are deducted as security against failure to remedy defects; in practice they are deducted to boost the liquidity of the paying party. As an SME the retention often reflects our margin. We have put up with this practice over many years; it has a significant impact on our growth and profitability.

Already, a couple of Australian states have legislation to protect retentions from insolvency and New Zealand is currently introducing such legislation. There is also similar protection in EU states such as France and Germany.

Last year Debbie Abrahams MP sought to introduce an amendment to the Small Business etc Act to require that cash retentions be placed in trust. We note that the government is introducing an Enterprise Bill which could provide an opportunity to address this issue. 

Therefore, I would be very grateful if you would let me know whether you would support the inclusion of a provision in the Enterprise Bill that requires cash retentions to be placed in trust.

I look forward to hearing from you.

Send an email to H&V News if you’ve received a positive response from your MP.

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