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Growing support for protecting supply chain cash retentions

19 December 2017

Increasing levels of support are emerging for the Private Member's Bill raised by Peter Aldous MP to tackle the issue of cash retentions, with the first reading due on 9 January 2018.

Bill Esterson MP, speaking on behalf of the Labour Front Bench Business Team, has expressed his concern at the damage inflicted by the loss of £700m in retention funds due to upstream insolvencies over a three year period.

"This works out at almost £20m per month, £4.5m per week and £900,000 per working day," he said.

Describing the impact this has on SMEs as "shocking", Mr Esterson continued: "It amounts to a massive drag on a key sector which, at the same time, is being encouraged by the government to invest in cutting-edge digital and manufacturing technologies."

Specialist Engineering Contractors' Group chief executive officer Professor Rudi Klein, a long-term campaigner for the protection of cash retentions, expressed delight at the emerging support from all parties.

"There is real urgency to address this issue in light of the precarious financial position of some of the top UK contractors.

"If any one of these was to fail thousands of SMEs will lose their retentions and, in the process, many will not be able to survive," he said.

Professor Klein estimated that Carillion, which has issued a number of profit warnings and has seen its share price plummet this year, holds approximately £250m of retentions which are either outstanding or due for release.

Additional support for action on the retentions issue has also been expressed in an open letter signed by 23 trade associations and professional bodies.

It highlights the fact that some £10.5bn of the overall construction sector turnover is held in retentions by clients and main contractors, typically from SMEs within the supply chain.

The solution to the issue is widely believed to be placing all retention funds in a statutory deposit scheme, rather than in the client's bank account, to protect the money in case of issues such as insolvency.

The letter was signed by the following signatories:
• SEC Group - Trevor Hursthouse OBE, Chairman 
• ECA, electrotechnical and engineering services trade body - Paul Reeve, Director of Business
• Building Engineering Services Association (BESA) - Rob Driscoll, Director of Legal & Commercial
• British Constructional Steelwork Association (BCSA) - Sarah McCann-Bartlett, Director General
• Lift and Escalator Industry Association (LEIA) - Nick Mellor, Managing Director
• SELECT - Alan Wilson, Director of Communications
• National Federation of Builders - Richard Beresford, Chief Executive
• Association of Plumbing and Heating Contractors (APHC) - John Thompson, CEO
• Scottish & Northern Ireland Plumbing Employers’ Federation (SNIPEF) - Fiona Hodgson, Chief Executive
• Contract Flooring Association - Richard Catt, CEO
• Structural Timber Association - Andrew Carpenter, Chief Executive
• British Blind and Shutter Association - Andrew Chalk, Director of Operations
• Confederation of Construction Specialists - Gerald Kelly, General Manager
• Federation of Traditional Metal Roofing Contractors (FTMRC) - Nigel Johnston, General Manager
• Lead Contractors Association - Nigel Johnston, General Manager
• National Association of Shopfitters - Robert Hudson, Director
• National Federation of Demolition Contractors - Howard Button, CEO
• Chartered Association of Building Engineers - Tony Ginda, Membership Development Manager
• Federation of Environmental Trade Associations (FETA) - Russell Beattie, Chief Executive
• Scaffolding Association - Robert Candy, Founder
• Stone Federation Great Britain - Jane Buxey, Chief Executive
• Glass & Glazing Federation - Phil Pluck, Group Chief Executive
• Finishes & Interiors Sector (FIS) - David Frise, CEO

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