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Retentions action plan given added impetus following Carillion failure

13 February 2018

Increased efforts to protect the retention funds of supply chain partners have been actioned by trade associations in the wake of the Carillion closure.

Announced as a joint initiative between the Building Engineering Services Association (BESA) and the Electrical Contractor's Association (ECA), it also follows the results of a survey conducted late last year that showed the problems experienced by the supply chain.

Although the results of the survey revealed that many subcontractors faced long waits to receive the retention funds owed, the Carillion collapse has also emphasised the issue that these funds are frequently lost altogether when larger businesses go into liquidation.

The latest call to action will additionally serve to provide more support to the Bill proposed by Peter Aldous MP, which had its first reading in Parliament last month, which calls for retentions to be placed in trust funds.

There were major concerns over retentions prior to the Carillion failure, with the recent survey showing that companies could wait up to 18 months or longer to receive their money.

With the average size of retention accounting for more than 5% of the contract, this was seen to exceed many supply chain profit margins.

Many businesses have previously reported that retention funds have been unfairly withheld or not paid at all, which can then be seen to have had considerable impact on the companies affected.

BESA and ECA have stated that if the Carillion retention funds had been placed in trust before its collapse, the impact on its supply chain would have been considerably reduced.

The consultation on this topic by the government closed at the end of last month and the two trade organisations have said that the Carillion collapse must now serve as a catalyst for change on retentions to protect the supply chain and support the government's Industrial Strategy.

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