The Bill’s first reading will take place on 09 January 2018. It seeks to amend the 1996 Construction Act to ensure retention money is held in a deposit protection scheme, ending the issue of upstream insolvency and the working capital it takes from the industry and SMEs. The average UK contractor has £27,500 withheld per year in retentions.
Payment retentions hurt thousands of small firms by limiting working capital and meaning they cannot train and hire apprentices.
Retentions have seen £10.5bn of annual construction turnover withheld and £7.8bn unpaid in the last three years, further exacerbated by upstream insolvencies that cost £700m of retentions entirely lost through the supply chain in the same three years. This equates to almost £20m a month, £4.5m a week or £640,000 per day.
BESA director of training, Tony Howard, has calculated that in educational and skills terms, £27,500 per contractor per year “for an Apprenticeship Levy payer is the equivalent co-investment for 22 apprentices a year.” He notes that “if you are a non-levy payer, that amount more than covers the salary for an apprentice, with a van, new tools and equipment and about £6,000 left over.”
Mr Howard concludes: “When pulled back to a bigger picture, we are missing the opportunity for around 3,000 new apprenticeships in building engineering services alone, for money to sit in unsecured accounts. Let’s help our sector meet the Industrial Strategy by making this money available.”
Peter Aldous has over 20 trade bodies and organisations backing his Bill, alongside several MPs already co-sponsoring. One of these is Sir Henry Bellingham, MP for North West Norfolk, who has long campaigned to improve apprenticeships.
At Prime Minister’s Questions he even raised the issue with Theresa May: Sir Bellingham said: “Post-Brexit it will be absolutely crucial that we enhance skills and apprenticeships in the construction and housing sector.
Does she agree that now is not the time for the Construction Industry Training Board to be proposing to close its site at Bircham in West Norfolk, putting at risk 600 jobs in a rural area? Will she meet me to discuss this, and will she help me in my campaign?”
He added: “It is the positive impact on SMEs and apprenticeships, skills and training that led me to sponsor Peter Aldous’ Bill.”
Government research shows that contractors, if they had access to withheld retentions, would hire more apprentices. When asked what they would do with retention money if it was not withheld or lost, 48 percent said they would invest in new equipment and facilities; 40 percent would look to take on more work; 29 percent would employ more apprentices and 22 percent would allocate the money to taking on their first apprentice.
BEIS data shows that construction represents over £89bn in the economy and infrastructure and enables a further £597bn of economic output – 43 percent of UK GDP at £808bn. Construction accounts for 9 percent of the total UK workforce at 3.1 million people, but over 50 percent of contractors report they have experienced non-payment of retentions in the past three years.