I have been contacted in the past by local companies who operate in the construction sector about the impact of the cash retention system on small and medium sized businesses. I recently took the opportunity to raise this issue directly with the Secretary of State for Business, Innovation and Skills, the Rt Hon Sajid Javid MP during Business, Innovation and Skills parliamentary questions to ask him directly what can be done to support companies in the construction industry who are impacted by such practises.
You can read more about this and my full exchange with the Secretary of State below:
Nigel Mills: Many businesses in the construction sector in my constituency are still suffering from excessive levels of retention being taken by prime contractors. What more can the Secretary of State do to encourage the phasing out of retention before the 2025 deadline?
Sajid Javid: My hon. Friend raises an important point that a number of people have made to me recently. Cash retention is a common practice that can provide insurance for customers against poor workmanship. However, the scope for misuse is clear. That is why the Government have commissioned a review of the practice. We will see what action we can take.
I welcomed the Secretary of State’s response that this Government is working closely with the industry through the Construction Leadership Council and its supply chain payment charter, which includes a commitment to zero retentions by 2025. I am aware that the Government has launched a commission to analyse the cost and benefit of retention payments to inform future action.
The partnership between the Government and the Construction Leadership is very important and an enduring solution relies on culture change within the industry – legislation alone is rarely successful in achieving change. I firmly believe that the outcome of the research and analysis will inform the discussion about how the industry moves to a position of zero retentions. I believe that the Government is working very closely with industry leaders to seek a durable solution and I welcome that the Government is currently looking at how best to proceed. I shall continue to follow this matter closely and represent my constituent’s concerns.