The Small Business Bill is continuing to tackle issues of late payment because late payment has been a scourge of the construction industry, with medium and smaller-sized companies bearing the brunt of the pain.
The Construction Industry Council set a target of 30-day payment periods by 2018, with the aim of 45-day payment periods being achieved by this year, but all the survey data suggests payment delays of 100 days are not uncommon.
Cash retentions, which are withheld as a form of security to encourage firms to return to remedy defects, are a bone of contention for contractors.
In reality we all know that retentions are used to improve the working capital of organisations holding them, usually a main contractor. Each year small businesses see millions of pounds worth of retention monies withheld with a stream of excuses as to why they can’t be released, or these retention monies are arbitrarily off set against other works. It’s also not uncommon for main contractors holding them to go bust.
At any one time £3 billion of your money is tied up in retentions. Ultimately this means that small firms are financing bigger firms to a huge amount. Even if you accept that some form of stick is necessary to encourage subcontractors to make sure defects are rectified, is it legal that the holder of retentions uses this money – your money – as though it’s sitting in their personal piggy bank; well, legal it is..!
Retentions should not be allowed to continue in their current form, and steps to protect your money are very welcome (see page 29). There were changes made to landlord deposits in the residential sector; surely the same can be made to happen in the construction industry? It is scandalous that there are no controls over the use of your money.
Adrian JG Marsh Editor