SCOTLAND’S largest construction trade body, SELECT, has welcomed the outcome of the UK Government’s consultation on retentions, which proposes to ban the withholding of retention payments under the terms of construction contracts.
However, the association is warning that while an outright ban is potentially good news for its members, its preferred solution is for cash retentions to be placed in a ring-fenced deposit scheme, such as a properly regulated independent trust or project bank account.
SELECT claims that by banning a ‘widespread and deeply embedded’ industry practice, there is a danger that retentions will simply reappear under a different guise.
Sharon Miller, MD designate at the association, said, “SELECT welcomes the news on this important issue, which damages supply chains and disproportionately impacts SMEs and contractors further down the supply chain. It has been acknowledged for some time that retentions don’t work for anyone except those holding the money. As an industry we need to focus on high-quality, contractually-compliant work by competent, qualified operatives – which is why we continue to campaign for regulation of electricians.
“When implementing the changes in Scotland we need to ensure that the Scottish Government works closely with industry to ensure that all the potential ‘workarounds’ are covered and effective measures put in place to enforce the ban properly, otherwise it may end up making little or no difference in practice.”
The proposals on retentions are designed tackle a problem which the government says costs the UK economy £11 billion a year, and also ease the situation of entrepreneurs and SME owners who are often forced to wait months or years to receive money they have already earned.
Ms Miller added, “As we are now in the pre-election period there won’t any progress on what line the Scottish Government will take until after the election on 7 May. In the meantime, we will continue to work closely with officials from both governments to secure the best outcome for our members.”
SELECT has been campaigning for years on retentions, which it claims are particularly harmful to smaller companies. It has argued the procurement process should be altered so that firms are selected on demonstration of competence rather than ab ability to offer the lowest price.
