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Labour frontbench calls retentions abuse scandalous

The Labour Frontbench Business Team has referred to the abuse linked to the practice of cash retentions in the construction industry as “scandalous”.

Speaking on behalf of the Labour Business Team, Bill Esterson MP said he was appalled by the statistics recently released as part of the research carried out by the Department for Business, Energy and Industrial Strategy (BEIS):

“Over a three year period, the industry – primarily SMEs – has lost £700 million worth of retention monies because of upstream insolvencies. This works out at almost £20m per month, £4.5m per week and £900,000 per working day.”

He added: “For an industry (that mainly comprises SMEs) to regularly haemorrhage this amount of cash is truly shocking. It amounts to a massive drag on a key sector which, at the same time, is being encouraged by this Government to invest in cutting-edge digital and manufacturing technologies.”

Bill Esterson was speaking following the news that Peter Aldous MP has laid a Private Member’s Bill to require all cash retentions to be lodged in a retention deposit scheme. The first reading of this Bill will be on 09 January 2018.

Professor Rudi Klein, chief executive of the Specialist Engineering Contractors’ (SEC) Group, which has been campaigning over many years for statutory protection of retention monies, is delighted with the emerging support from all parties for this measure.  

He added: “There is now a real urgency to address this issue in light of the precarious financial position of some of the top UK contractors. If any one of these was to fail, thousands of SMEs will lose their retentions and, in the process, many will not be able to survive.”

Professor Klein estimates that Carillion alone approximately holds a quarter of a billion of retentions which are either outstanding or due for release.

Trade organisations across the industry and their member firms are now speaking to their MPs to garner support for legislative action.

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