Calls for cash retentions to be placed in a ring-fenced or protected account so they are not misused have been made by Professor Rudi Klein, barrister and chief executive of the Specialist Engineering Contractors’ Group.
The government is working towards abolishing retentions by 2025 but at any one time £3 billion worth of retention monies are outstanding in the construction industry.
Professor Klein said: “Retention monies should be placed in a secure deposit account. The purpose of retention monies is to provide security in the event that a contractor does not, for whatever reason, return to remedy defects. But the abuse in the system is nothing short of scandalous.
“If cash retentions were protected, this would also deter those wishing to deduct and use them for purposes for which they were not intended.When considered fully, why would anyone object to funds belonging to a small business being protected from misuse or loss?”
An industry source told SpecFinish: “Retentions are old fashioned and often used by some main contractors to hold onto our money.”
In 2015 approximately £40 million worth of retentions were lost because of insolvencies. The largest loss in 2015 was caused when GB Building Solutions went bust owing trade creditors £9 million it held in retentions.
What can SpecFinish readers do now?
The Enterprise Bill is now in the House of Commons. Send this news item to your MP. Ask if your MP would support a measure for inclusion in the Bill that cash retentions are placed in a retention deposit account (similar to the model already adopted for tenancy deposit schemes).
Do you have any cash retention horror stories?
Let your MP know and forward them to the Editor (anonymity will be preserved unless you state otherwise).
It’s about time that we ended the scandal of the abuse and misuse of cash retentions.