Political support for holding cash retentions in trust has soared, with more than 100 MPs already in favour of ring-fencing of retention monies. Cross-party support for retentions reform includes Conservatives, Labour, Liberal Democrats, SNP, DUP, Plaid Cymru and the Green Party. Supporting MPs represent constituencies covering the whole of the UK.
Support is growing for the Construction (Retention Deposit Schemes) Bill ahead of the second reading in Parliament this week and it has been fuelled by the collapse of Carillion. Prominent supporters include; Labour frontbench, Shadow Chancellor John McDonnell, Shadow BEIS Minister Rebecca Long-Bailey, Conservative ‘Father of the House’ Kenneth Clarke, former Digital Economy Minister Ed Vaizey, Liberal Democrat Leader Sir Vince Cable and Green Party Leader Caroline Lucas.
Peter Aldous MP, who introduced the bill in January, said: “Industry support for reform to outdated payment systems is at unprecedented levels, for which I am very grateful. Construction is an essential underpinning of our lives and work, and we need to support the industry and especially SMEs to ensure future growth and prosperity. The petition being presented represents over 330,000 businesses and there are over 100 of my Parliamentary colleagues that support reform to the practice of cash retentions.”
“We have a golden opportunity to improve the industry for the better, level the playing field for SMEs and protect thousands and thousands of jobs. The industry loses around £1m for each working day, mostly from SMEs. There have been proposals to stop the abuse of retentions before, but this time there is the largest coalition on fair payments ever.”
Speaking on behalf of SEC Group its chief executive, Professor Rudi Klein, said that as much as £¾ billion worth of retention monies could be contained within the £7bn (and rising) of Carillion’s liabilities.
Professor Klein added: “We know that Ministers are sympathetic towards the Bill but, at this stage, the Government must issue a robust public statement of support for the Bill.”
David Frise, the new chief executive at BESA, said: “The urgent need for reform is clear from the cross-party support the Aldous Bill has. The impact from lost Carillion retention money on apprentices, jobs and investment in the sector is already evident. Holding cash retentions in trust will make sure that the money is safe and does what it is intended to do.”
The Construction (Retention Deposit Schemes) Bill stipulates that, unless the monies are protected, any clause in a construction contract enabling the deduction of cash retentions, will be invalid. Cash retentions will have to be safeguarded within a retention deposit scheme. The Bill will apply to the whole of the UK.
The rules for establishing and operating retention deposit schemes will be contained in secondary legislation. Such schemes may simply provide a “custodial” service to ring-fence the monies or, instead, could provide insurance-backed alternatives. Schemes would be expected to provide quick and inexpensive adjudication or mediation procedures to resolve any disputes holding up release of the monies.