21 June 2019

Build UK Moves Forward on Achieving Zero Retentions

Build UK has reached a major milestone on the roadmap to zero retentions by publishing new minimum standards for the use of cash retentions.

By providing detailed drafting guidance for members to incorporate the minimum standards into both JCT and NEC forms of contract, Build UK is aiming to reduce the challenges associated with the existing use of cash retentions.

The Minimum Standards on Retentions are based on a number of principles, including:

  • Any arrangements for retention are no more onerous than those implemented by the client in the Tier 1 contract
  • Retentions are only deducted from payments made in respect of permanent works
  • Any retention is deducted from the payment immediately following practical completion
  • Retentions should be progressively phased out on the basis of contract value.

Fair and transparent payment practices are essential for a successful construction industry, but the practice of cash retentions has proven problematic for all parties in the supply chain. The practice of ‘passing on’ retentions in order to secure cash flow, coupled with the loss of monies held in retention due to insolvencies, has a negative effect on cash flow across the industry. The abuse of retentions can also undermine the spirit of trust and collaboration that is needed to improve efficiency.

That is why Build UK supports the industry ambition to move to zero retentions by no later than 2025, and we are calling for Government legislation to abolish cash retentions supported by our industry-led Roadmap to Zero Retentions with milestones to show that progress is being made. Unfortunately, despite consulting on this issue in 2017-18, Government to date has made no commitment to deliver policy change.

Jo Fautley, Deputy Chief Executive of Build UK, said:

“Whilst the lack of Government response is disappointing, Build UK is proactively delivering on its roadmap to zero retentions. We believe that clients, contractors and the supply chain can all implement these practicable steps as part of the transition over the next few years. The construction industry needs to change, and achieving zero retentions is a vital part of becoming a more collaborative and efficient sector.”

For further information, visit www.BuildUK.org/retentions