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MP support for protection of cash retentions

07 December 2017

Further attention has been focused on the ring-fencing of cash retentions to protect members of the FM and construction sector supply chain.

This topic has received increasing attention in recent months, including research commissioned by the Department for Business, Energy & Industrial Strategy (BEIS) that showed £7.8bn of retentions was outstanding over a three-year period.

The latest development has seen Peter Aldous, MP for Waveney, present a Private Member's Bill for the ring-fencing of cash retentions, with the first reading on 9 January 2018.

Cash retentions are designed to ensure that any faults are rectified at the end of a project by withholding payment until the work is completed to a satisfactory standard.

However, BEIS research has revealed that these sums are frequently used to bolster the working capital of those withholding them and retentions have been the subject of widespread abuse.

Companies have reported that sums have been withheld for over three years without justifiable cause, severely impacting members of the supply chain, many of which are SMEs.

Research conducted by the Specialist Engineering Contractors' (SEC) Group has also revealed that £700m of retentions was lost over the last three years due to larger organisations going into liquidation.

Mr Aldous said he had been aware of the retentions issue for some time and said that small businesses need protection within the "tough industry" of construction.

"There are a number of specialist engineering firms in Waveney and what this bill aims to do is to protect them and their livelihoods as well as 280,000 other construction SMEs nationwide," he said.

He further stated that SMEs would frequently suffer double hits when a large organisation goes out of business, firstly from losing work and secondly from the loss of cash retentions.

Stating that SMEs require protection because they are the "backbone of the UK economy", Mr Aldous said the bill "is not about abolishing payment retentions; it is about making sure that people's money is safe so that businesses can grow and invest in their future".

SEC group chief executive officer Rudi Klein recognised the fact that the bill has cross-party support and said:

"I'm very grateful to Peter Aldous for initiating this. All that is required is mutuality of security.

"If cash retentions are required as a form of security, there must also be security for cash as exists in many other countries around the world," he said.


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