SNIPEF welcomes report on cash retentions and recommendations

SNIPEF, the Scotland and Northern Ireland Plumbing Employers’ Federationhas applauded the work undertaken by the Short Life Working Group (SLWG) in its investigation into cash retention in construction contracts and the practical recommendations it has made to the Scottish Government with a view to ending the iniquities of the system.

Cash retentions are deducted from due payments, ostensibly as security in case a firm fails to return to remedy non-compliant work. In practice, the monies – which belong to the firms from which they have been withheld – can be used to bolster the cashflow of large companies and even public sector bodies such as local authorities.

Membership of the SLWG was drawn from across the sector and included, SNIPEF Past President Gordon Matheson of Matheson Plumbing Company, whose influence and persuasion, combined with support from construction expert Professor Rudi Klein, were major contributory factors in the report.

Fiona Hodgson, Chief Executive of SNIPEF, said: “This report, which has been informed by some of the most constructive thinkers in the industry, addresses our long-term aim of creating a fairer competitive landscape in which smaller firms can thrive.

“Payment abuse has been a thorn in the side of many firms for many years and SNIPEF would like to thank Gordon Matheson and other members of the SLWG for the experience, expertise and effort they have brought to a report which we hope will be quickly adopted by the Scottish Government.”

The report recommends, among other points:

  • Legislation for a statutory custodial Retention Deposit Scheme, similar to the project bank accounts for which SNIPEF has long argued.
  • A best practice policy.
  • Automatic release of retentions as early as possible unless a clear issue has been identified.
  • Publication of, and compliance with, retention policies on major contracts (i.e. with whole life costs in excess of £5 million).
  • Scottish Government to work with industry to ensure retention best practice is reflected in standard construction contracts, including dispute resolution and conflict avoidance procedures.

Gordon Matheson said: “We recognise that an immediate ban would cause a shock to the industry but see this development as a stepping stone towards our longer term ambition of abolishing retentions entirely.

“We think the actions proposed in the report will improve business sustainability across the construction sector, particularly among SMEs and would like to see the recommendations implemented as soon as possible.

“The SLWG recognises, however, that wider consultation may be necessary before legislation can be laid before the Scottish Parliament.”

Rudi Klein, who has led the campaign on this for many years, said: “I pay tribute to the Short Life Working Group for all their hard work. The imperative now is for Scottish Government to legislate to protect retention monies and in this way deny the abusers of the system to use the monies as part of their working capital.”

The construction sector is a crucial part of Scotland’s economy, accounting for £7.8 billion of Gross Value Added (GVA) and annual turnover of £19.2 billion in 2018.

The sector also provided employment to 143,000 people in 2019. There were more than 47,000 businesses operating in the sector in 2020, of which 99% were small enterprises (0-49 employees).

SNIPEF has been at the forefront of support for companies to ensure a vibrant and dynamic industry staffed by professionals versed in the complexity of the technologies which are underpinning renewables and meeting the demand for clean energy in an age of climate change.