The clarion call for no retention has persisted for many years and has once more initiated action. This time BEIS undertook a consultation “on the practice of cash retention under construction contracts”, with its outcome imminent. Meanwhile a private members’ bill from Peter Aldous received its first reading but its second is delayed until October. The cynical might consider this a deliberate ploy but it is probably more about the consultation outcome and the possibility of government itself legislating.

Whether retention can ever be abolished depends on how it is defined. BEIS research paper 17 (October 2017) stated “retention is a sum of money withheld from the payments of a construction sector project in order to mitigate the risk that such projects are not completed […] to the required quality standard”. Furthermore, it is “a safeguard against defects which may subsequently develop and which the contractor may fail to remedy”. Whereas under the Aldous bill reference is made specifically to “cash retention […] monies which are withheld from monies which would otherwise be due under a construction contract, the effect of which is to provide the payer with security for the current and future performance by the payee of any or all of the latter’s obligations under the contract” and to a retention deposit scheme.

The total abolition of retention is inappropriate, and even the universal abolition of cash retention is undesirable because the alternatives are not always appropriate to all forms of construction project

The voices for abolishing retention have risen following the collapse of Carillion because this has highlighted the issue of firms not being paid for work done, but there is a significant difference between security of payment in the event of insolvency and that of retention. Although both impact upon cash flow, they are quite different in their nature and potential effect.

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