The construction industry faces increasing pressure for government intervention on retentions.
- Mark Reynolds of Mace highlights the lack of industry support in addressing retention issues.
- Current retention practices hinder cashflow, particularly affecting smaller contractors.
- Attempts to amend retention clauses in JCT contracts have been unsuccessful.
- Government’s previous plans to address retentions require further legislative action.
In a recent podcast interview, Mark Reynolds, CEO of Mace, called for direct legislative action from the government to abolish retentions, citing inadequate support within the construction industry to resolve the issue.
The CEO’s statement comes after efforts to eliminate standard retentions clauses in the new Joint Contracts Tribunal (JCT) contracts were unsuccessful, despite the Construction Leadership Council’s (CLC) lobbying efforts. Reynolds stressed the divided stance among CLC members on this issue, reflecting broader industry disagreements over retention practices.
Industry data reveals the pervasive nature of retentions, with 82 per cent of subcontractors experiencing retentions on more than half of their projects. Such financial arrangements, often worth up to 5 per cent of a contract’s value, significantly delay payments, undermining cashflow for contractors, especially those in tiers two and three.
Historically, government bodies have acknowledged the detrimental impacts of retention on business liquidity but have opted to leave resolution to the industry. However, Reynolds’ call represents a significant shift, marking the first instance a leading contractor has publicly urged for government intervention to resolve this enduring challenge.
Previous government initiatives attempted to enhance transparency by obligating tier one firms to declare retention holdings. Despite these measures, there remains scepticism about their efficacy, with concerns about the accuracy of retention data and the potential for skewed figures, as noted by industry experts.
As Reynolds announced his impending departure from Mace, the onus on government action becomes even more pronounced. The legislative changes necessary for meaningful reform appear to rest with future governmental decisions, as prior plans lapsed before parliamentary discussions concluded.
The future of retention reform in construction hinges on decisive legislative intervention from the next government.
