New bill to protect the rights of small construction firms
PUBLISHED: 11:22 14 February 2019 | UPDATED: 11:22 14 February 2019
An issue on which I've been working in Parliament over the past year is to reform the system of retentions in the construction industry.
This is the arrangement whereby the main contractor of a building or engineering project deducts a payment, usually five per cent but sometimes 10pc from the money that they owe to their sub-contractors, such as plumbers, electricians and lift installers, for the work that they have carried out.
This money is then held as security in case the sub-contractor fails to return to rectify any defects in the work which they have carried out which become apparent. This money should be returned to the sub-contractor within 12 months of the handover of the works in question.
Unfortunately the system is often abused; very much to the detriment of small businesses and there are regular delays of up to three years and in one case 12 years before the money is returned.
In some instances it has not been returned at all.
Small businesses are particularly vulnerable if the main contractor goes bust and this is what happened early last year with Carillion, who owed £800 million to their sub-contractors at the time of their insolvency.
This is money that these businesses will never receive.
In the same month as the collapse of Carillion, I introduced a Bill in Parliament to address the problem.
This involves retentions being placed in a Government approved scheme where they are secure and available to be released on time rather than subject to the current much longer delay.
Moreover the money would not be caught up in any administration or insolvency arrangement if the main contractor ran in to financial difficulty.
The problem that I face is that my Bill is a Private Member’s Bill and there is very little legislative time available to get it through Parliament and in to law.
I thus need to persuade Government to bring forward the necessary legislation themselves. Working with the Building Engineering Services Association and the Electrical Contractors Association, we’ve obtained cross-party support for the Bill from over 270 MPs and from 85 trade associations and professional bodies representing nearly 600,000 businesses and traders.
I’ve been liaising with the relevant Government ministers, who now accept that reform is needed, though the exact form that this takes needs to be agreed, with a consensus being established across the whole construction industry.
Last month I was provided with a demonstration of how the system would work.
It is very much digitally based and an App has been constructed. My immediate objective is to persuade Government to run a pilot.
The abuse of retentions is grossly unfair. It has prevented many small businesses from expanding, has caused much anguish to those running them and in the worst cases has led to their collapse for reasons completely outside their control.
It is time that such abuse is outlawed. If any readers have had bad experiences with retentions then please let me know.