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Last edited 15 Mar 2019
Campaign for cash retentions reform
|A total of 271 MPs across all parties support the reform of cash retentions.|
Retentions are held by private and public sector clients against their subcontractors, with over £10.5bn of SME working capital locked in retentions annually. Some £7.8 billion of this has been unpaid in the last three years.
However, the system is often abused, negatively impacting many businesses in construction, particularly SMEs.
As a result, ECA, BESA and various partner organisations have been pressing Government to reform this practice. Reform of cash retentions in construction is now supported by a broad range of politicians, business bodies, construction trade associations, and professional bodies.
 Impact of retentions
Deprivation of working capital leaves businesses unable to grow (bid for new work), invest (engineering R&D and investment in digital transformation), recruit (new workers and apprentices), pay tax bills, and therefore precludes productivity improvement.
In the UK, recent government research shows £700m of retentions were lost from upstream insolvency over a three-year period (prior to the collapse of Carillion). For each working day, the industry loses almost £1m, £4.5m per week or £20m per month.
Research has found that SMEs spend on average 130 hours per year chasing late payment from larger firms. And 34% of SMEs borrow to cover cash-flow issues caused by cash retentions. Often this is written off as bad debt, due to the resource implications of chasing monies due.
Cash flow issues leave businesses unable to:
 About this article
This article is an amalgamation of two articles that first appeared on the website of the Electrical Contractors’ Association (ECA) in March 2019: 'About the campaign' can be accessed here ; the 'Impact of retentions' can be accesed here.
 Related articles on Designing Buildings Wiki
- Retention bond
- Retention in construction contracts
- Defects liability period DLP
- Construction (Retention Deposit Schemes) Bill 2017-19
- Performance bond for construction
- Defects in construction
- Bonds in construction contracts
- ECA articles
- Final account
- Final certificate for construction contracts
- Liquidated damages in construction contracts
- Valuation of interim payments
- Right to payment
- Variations in construction contracts
- Contract sum
- Domestic sub-contractor
- Insolvency in the construction industry
 External references
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