The Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF) has hailed the Scottish government’s announcement of an industry-wide consultation on the use of cash retentions in construction as a significant step forward.
The organisation has campaigned consistently, in conjunction with the Specialist Engineering Construction (SEC) Group, for Holyrood to take action on the issue of payment abuse.
As part of its recent manifesto, published during the 2019 General Election, the organisation – which represents plumbing and heating professionals – asked for new laws to deal with cash retentions and for a fairer competitive landscape in which smaller firms can thrive.
It welcomed the consultation exercise, which closes on 25 March, 2020, and encouraged all firms engaged in Scotland’s construction industry to participate in it and support legislation to ring-fence the monies involved in retentions.
SNIPEF Chief Executive Fiona Hodgson, said: “Cash retentions have been a thorn in the side of small to medium companies involved in the construction industry for many years and, at the very least, they must be put in a ring-fenced account or scheme.
“The research by the consultants behind the Scottish government’s initiative identified evidence suggesting that many companies deliberately avoid business in which retentions are involved and that the system operates to the disadvantage of SMEs.”
Cash retentions are deducted from due payments, ostensibly as security in case a firm fails to return to remedy non-compliant work.
In practice, the monies – which belong to the firms from which they have been withheld – are used to bolster the cashflow of large companies and even public sector bodies such as local authorities, says SNIPEF.
Various estimates put the loss of cash retentions from the Carillion collapse in 2018 as between £¼ billion and £½ billion.
SNIPEF’s position on cash retentions is one of a number of stands it has taken on behalf of member companies with a focus on critical changes needed to create a resilient and sustainable construction sector.
Trade organisations are urging legislation to impose penalties on serial late payers, while establishing the use of project bank accounts in the public sector.
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