Proposed legislation to protect retention monies in the event of insolvency will soon receive its second reading in the House of Commons and will then progress to detailed Parliamentary discussions in a committee stage, unless rejected by MP’s.
Even if it gets the nod from MPs a busy parliamentary timetable might well prevent it getting parliamentary time, assuming anyone has time to draft it with Brexit capturing most civil service attention.
The proposed legislation – the Construction (Retention Deposit Schemes) Bill 2018 – has been introduced under the 10 Minute Rule Motion procedure, a Private Member’s Bill put forward by Peter Aldous MP. Having been responsible for highlighting a situation that resulted in a Private Member’s Bill in the past, this writer is well aware of the pitfalls that lie ahead for any legislative proposal introduced under this rule. Unless a proposal has solid government backing it stands little chance of success.
Which is a pity as this legislation would be of benefit to many companies in the industry who could suffer fatal damage through no fault of their own, losing money they have earned and which should have come their way – after delay – but has been lost in a contractor insolvency.
The Carillion collapse has brought all of this to the fore as no other event in construction’s post war history has done. The fallout from that company’s demise is extremely damaging to the industry; stories about companies going bust and struggling for survival abound and there will be several more before the dust settles on this collapse.
After it all however the issue of retentions will remain, even if Mr Aldous’s Bill succeeds. What it would do is prevent companies losing £1 million a day in retentions when the companies they have worked for become insolvent. But it would not affect other losses such as the time and effort expended in trying to get retentions paid even long past the due date by solvent companies. There is also the cost of financing the cash flow shortfall that retentions represent.
The case is stacking up strongly for the abolition of retentions completely, something that has often been called for but never seems to climb to the top of the political agenda. The government is currently consulting on retentions and with the Carillion collapse fresh in people’s minds, the time might have come for abolishing retentions completely.Several construction bodies have called for just that, with Build UK for example highlightin
g that retentions are symptomatic of a lack of trust and focus on performance in the industry. Retentions are valued by some clients as they need some comfort that snagging lists will be properly worked through. But a lot of retentions are money withheld by companies within the industry from its own suppliers; clients might know nothi
ng about them. As Build UK argues, the industry needs to get more right first time, which would undermine the need for retaining contract sums. Better performance and an end to retentions in a collaborative future go hand in hand. Hitting Build UK’s target of zero retentions by 2025 would signify that something had gone very well in the industry.