Research conducted by Pye Tait for the Department of Business, Energy & Industrial Strategy (BEIS) has revealed almost £700 million worth of cash retention has been lost in construction by reason of insolvencies.
Following the research, BEIS has begun a consultation to seek information on the practice of cash retention under construction contracts and gather views on the findings of the supporting documentation. The consultation will run until 19 January 2018 and can be found here.
The Specialist Engineering Contractors’ (SEC) Group has described the figure as “shocking” and far in excess of its own estimates.
SEC Group CEO Rudi Klein said that this vast sum, without more, justified legislation to ring-fence retention monies: “The bulk of these monies will have been lost by SMEs. They legally belong to the firms from whom the monies were withheld; consent to the withholding of the monies did not extend to their being used to pay off the insolvent party’s creditors. This represents a scandalous and continuing drain on the scarce resources of SMEs in the construction industry.”
SEC Group has been campaigning for all cash retentions to be deposited with independently run retention deposit schemes.