What's Happening?
The Construction Leadership Council (CLC) is actively engaging with the UK government to address longstanding issues of late payments and retentions in the construction industry. The government has launched a consultation aimed at implementing significant
legislative reforms to tackle these issues, which reportedly cost the UK economy £11 billion annually. The proposed measures include a potential ban on retentions or the requirement for them to be held in a separate bank account. The CLC plans to write to ministers to express the industry's views once a clearer consensus is reached. Various industry bodies, including Build UK and the Construction Industry Council, have expressed support for reform, though opinions differ on the best approach.
Why It's Important?
The proposed reforms could have a substantial impact on the construction industry, particularly for small and medium-sized enterprises (SMEs) that are often most affected by late payments and retention practices. By potentially banning retentions or requiring them to be secured, the reforms aim to improve cash flow and financial stability across the supply chain. This could lead to a more equitable and efficient industry, reducing the risk of insolvency for smaller firms. However, some stakeholders, like the British Property Federation, caution that a complete ban on retentions could increase investment risks and affect the quality of construction projects.
What's Next?
The government will review the results of the consultation, which closed recently, to determine the next steps. The CLC and other industry bodies will continue to engage with the government to ensure that any new regulations are practical and beneficial for the industry. The outcome of this consultation could lead to legislative changes that reshape payment practices in the construction sector, with potential implications for contract terms and project financing.
