Scotland launches consultation on cash retentions

cash retentions

December 05, 2019 – The Scottish government has opened consultation on the practice of cash retentions for construction contracts.

“There is evidence that some payment practices prevalent in the construction industry are a barrier to investment, productivity improvements and growth,” says the introduction to the consultation. “Cash retention, where the process is misused or abused, can be one such practice.”

Following concerns expressed by parts of the industry, the Scottish government agreed to undertake a review of retention payments. To support the review, the Scottish Government commissioned independent research from Pye Tait and the research is published alongside the consultation.

The purpose of this consultation is to seek information on the practice of cash retention in public and private sector construction contracts in Scotland and to gather views on the findings of the supporting documentation published with this consultation.

The Specialist Engineering Contractors’ (SEC) Group has been campaigning for change. It said that, in practice the retention monies – which belong to the firms from whom they have been withheld – are used to bolster the cashflow of large companies and even many public sector bodies such as local authorities. It pointed out that various estimates put the loss of cash retentions the Carillion collapse as between £250m and £500m.

SEC Group Scotland has been carrying out extensive lobbying amongst members of the Scottish Parliament to encourage them to support legislation to ring-fence the monies. SEC Group Scotland national executive officer Alan Wilson said: “Our message is clear. Cash retentions must be put in a ring-fenced account or scheme.  In this way we are more likely to see the end of a 200-year-old practice which has been abused to the detriment of small firms which often wait years to get their retentions released.”

Source:-https://www.theconstructionindex.co.uk/news/view/scotland-launches-consultation-on-cash-retentions

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