Last edited 21 Mar 2018

Construction (Retention Deposit Schemes) Bill 2017-19

The Construction (Retention Deposit Schemes) Bill 2017-19 is a Private Member’s Bill introduced to Parliament by former charted surveyor Peter Aldous MP on Tuesday 9 January 2018 under the Ten Minute Rule.

Retention is a percentage (often 5%) of the amount certified as due for payment to a contractor that is retained by the client to ensure the contractor properly completes the construction works. Retention clauses may also be imposed on subcontractors.

However, retentions can cause cash flow problems for contractors and subcontractors, and this can be exacerbated by non-payment or late payment.

On 26 April 2017, Alan Brown MP introduced the Construction Industry (Protection of Cash Retentions) Bill, to prevent this, but it did not progress because of the general election.

In October 2017, the government published the Pye Tait review; Retentions in the Construction Industry, which assessed the costs and benefits of retentions and alternative mechanisms. This was followed by a consultation into 'the practice of cash retention under construction contracts'.

The Construction (Retention Deposit Schemes) Bill 2017-19 proposes making provision for ‘…protecting retention deposits in connection with construction contracts; and for connected purposes’. It would do this by ensuring that retentions are held in a third party trust scheme.

During the first reading of the Bill, Peter Aldous said; “This Bill is relatively straightforward. It would amend the Construction Act to require the Secretary of State to introduce regulations to protect retentions. It would bring closure to the many efforts made in the past to address the problem. In doing so, it would transform the prospects of SMEs, which make up 99% of firms in the UK construction industry.”

The Bill passed its first reading and is scheduled for its second reading on 27 April 2018.

On 12 March 2018, 60 industry bodies gave their support to the Bill, coordinated by the Building Engineering Services Association (BESA) and the Electrical Contractors Association (ECA).

ECA director of business Paul Reeve said; “Quite simply, the time for major change to retentions is now. Putting retentions in trust would help to protect the supply chain from future upstream insolvency, and it would reduce the amount held in retentions when buyers see that they can no longer use suppliers’ cash to support their own business model.”

However, on 14 March 2018, it was reported that the British Property Federation (BPF) - who had appeared on the list, did not in fact support the Bill. Ian Fletcher, director of real estate policy later clarified; "Our concern with the bill is that reforms must look at a broader range of issues that cover payment, risk and performance obligations throughout the whole supply chain and these are not likely to be covered and fully considered in a 10-minute rule bill."

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