The recent collapse of construction firm Carillion, which went down owing £6.9billion of accumulated debt, left many suppliers facing potential ruin over the retention payment scheme. Following the company’s liquidation announcement it was estimated that £800 million in retentions were owed to suppliers.
Peter Aldous, MP for Waveney, brought the retention issue within the construction industry to light in Parliament in January 2018. The second reading of the Bill, which outlines retention reform was on April 17th and it received unprecedented support following Carillion’s collapse.
It is estimated that more than one in six MPs are backing the planned reforms and 120 voted for the Bill this week including Defence Secretary Gavin Williamson, Shadow Chancellor John McDonnell, Liberal Democrat leader Vince Cable and Green Party leader Caroline Lucas
Anne Timpany, Co-Founder and Director of award-winning commercial plumbing firm On Tap Plumbers says “ Like many subcontractors, we lost a substantial retention payment because of the Carillion situation although many suppliers were affected far more seriously. Retentions can often be even higher than profit margins and if companies hang on to the money long after the work has been completed it can create very severe cash flow problems for many smaller companies.
“It is excellent news that MPs are supporting this retention reform bill as it will have a very positive effect on the construction industry, which is such a vital part of the UK economy.”
Retentions are designed to provide security for the quality of completed work and against insolvencies of parties in the supply chain. Through the introduction of retention deposit schemes, it would ensure that the money that suppliers have to pay is secured and the main contractor is unable to misuse retention payments for its own purposes.
A petition representing over 330,000 businesses will be presented to Downing Street on Monday ahead of the bills second hearing in the House of Commons this Friday.