Construction Industry: Retention Payments

Lord Aberdare Excerpts

Thursday 14th January 2021 Lords Chamber

Asked by

[Lord Aberdare]

To ask Her Majesty’s Government what steps they have taken since the publication on 26 February 2020 of the responses to their consultation on retention payments in the construction industry.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

The Government, in conjunction with the Construction Leadership Council, are working to develop a sustainable strategy on retentions for the whole sector. During the current pandemic we have also provided guidance to the industry on responsible and fair contractual behaviour, including in relation to retentions. We are committed to improving payment practices and working with the construction industry to take this important matter forward.

[Lord Aberdare (CB)]

My Lords, it is three years since the Government’s consultation on retentions ended and, as we have been reminded today, three years since the collapse of Carillion, which led to small construction firms losing hundreds of millions of pounds in retentions. Retentions limit their ability to invest, grow, train staff, take on apprentices and, all too often, survive. The actions mentioned by the Minister are better than nothing but do not go nearly far enough. I have two questions. What are the Government doing now to prevent small construction firms, already under pressure from the pandemic, being crippled because funds properly belonging to them are being used by larger clients to prop up their own cash flows? When will the Government introduce the legislation reform that is recognised as the only way of bringing proper ongoing relief to these small firms?

[Lord Callanan (Con)]

I know that the noble Lord has been active for many years on this important issue. This has been a slower process than we might have liked, in part due to the complexity of the issues associated with the practice of cash retentions and the wide range of interested parties. While most in the construction industry favour or could accept change, unfortunately no consensus on a preferred solution has emerged from industry to date.