Retentions, fair payment and Build UK’s stance in relation to the Aldous Bill.
IF something’s just plainly, obviously wrong and if you can do something about it, why wouldn’t you?
That’s the question I’d like to put to Build UK and the non-consenting members behind Build UK’s decision not to lend support for the Aldous Bill, first brought to parliament earlier this year.
For those people who aren’t fully aware of the bill, it’s an attempt by the MP for Waveney in Suffolk, Peter Aldous to make retentions in the construction industry illegal, unless they’re held in a protected deposit scheme that ensures retentions are repaid to the subcontractor as appropriate. The bill would see retentions handled fairly and eradicate situations where subcontractors lose their money, following the collapse of a main contractor, as happened with Carillion.
What can possibly be wrong with that? Well obviously something for the executive team of Build UK, which is unable to support it.
According to a report in leading construction magazine Construction News in May, the proposed bill – which is due to have its second reading in the House of Commons next month (October) – has the support of 150 MPs and 80 trade bodies, 21 of which are members of Build UK, including the CFA.
In a formal letter to Andrew Griffiths MP, the secretary of state for business, energy and industrial strategy, Suzannah Nichol, the ceo of Build UK, explained why Build UK was unable to support the Aldous Bill.
Her reason was that ‘we’ve not reached a consensus on a retention deposit scheme’.
Who could argue against this bill and what could be their motives? The only beneficiaries to maintaining the way retentions are handled are the contractors who hold onto those retentions and utilise them within their business or earn interest off them. I’ve been told of one contractor who opened up to a sub-contractor that his organisation couldn’t function without retentions. Is this the reason behind a lack of consensus?
Is any Build UK member willing to publicly state their objection to the Aldous Bill and the reasons for their opposition to it? Or perhaps Build UK would like to explain what objections it’s received.
What Build UK has done is make a big point about something the industry does totally agree on (according to them); that’s the universal commitment to abolish retentions altogether.
So, what am I writing this column for and why is Peter Aldous bothering to bring a bill to parliament trying to ringfence retentions when they’re due to be abolished altogether?
Well, because they’re not. Build UK is keen to make its case that it’s 100% behind the aim to get rid of retentions, as, according to Suzannah Nichol’s letter to Andrew Griffiths (as well as outlined in a press statement issued at the start of this year), ‘the benefits of zero retentions are clear: increasing capital within the supply chain will drive innovation, investment and productivity and transform the way we operate’. Well hooray, let’s get on with it.
Unfortunately, Build UK’s lofty ambition is caveated by a rather large ‘but’, which means the abolition of retentions isn’t going to happen anytime soon.
Build UK, along with the Civil Engineering Contractors Association (CECA), supported by the Construction Products Association (CPA) issued a joint statement (safety in numbers I suppose) to confirm their ‘full support for the abolition of retention (sic) by no later than 2025.’
That’s right no later than 2025! That’s only seven years away.
And what’s Build UK’s methodology for achieving its seven-year aim? Back to Suzannah’s letter: ‘We all (Build UK, CECA and CPA) believe government and industry should work together on a joint approach of legislation to abolish retention (sic) supported by an industry-led roadmap with milestones that would not only demonstrate real progress is being made but would tackle the reasons why retentions exist in the first place.’
Roadmap, milestones? Is this Build UK or the RAC? What on Earth in normal people’s vocabulary does that actually mean?
What happens if 2025 comes and goes without retentions being abolished?
Is there anything that could possibly happen in terms of the construction industry reaching a consensus or anything in the political world that could possibly hamper this absolute, absolute (we really mean it this time) commitment to abolish retentions?
Brexit, US trade sanctions, more taxation to fund an extra £20bn for the NHS are just three things that might have an effect on the economy and the need for large companies to want to keep hold of cash for a bit longer. Who would have predicted any of these just three years ago? So, who knows what might crop up in the next seven years.
When the roadmap is unfurled, what if the journey is further and more difficult than first thought? What if we don’t have enough petrol to compete the journey (can we fill up on route)?
Seven years is a long, long time. If things slip (as they’re more than likely to do), will it be 10 years or 15 or more?
And what about in the meantime? How many more Carillion-type situations are we likely to face?
Suzannah Nichol ends her letter to Andrew Griffiths by saying ‘the priority is to demonstrate to the industry that the lessons from Carillion will be learnt, there will be clear action from government, and payment practices will improve as a result.’
The Aldous Bill will, if passed, immediately address one simple lesson of the Carillion collapse: any retentions held back from subcontractors would be repaid to those companies. A 5% or 10% retention may well be a subcontractor’s entire profit from a job. Who can afford to work for nothing?
Build UK and other bodies who don’t support this bill offer the alternative of working towards zero retentions.
Even if this happens within the proposed timescale, it’ll take seven long years to get there when we need and could have protection of retentions now. Why won’t Build UK support this bill, while still working towards zero retentions; they’re not mutually exclusive?
Instead, Build UK is proposing jam tomorrow. Stick with them and look what you might possibly get. Then again, you might not.
I have recently ended my second stint as President of the CFA. During that time I wrote a regular column for this magazine and one of my first ones observed that many issues we face today are the same issues we were discussing during my first term in office in 2000.
Retentions and fair payment were amongst them. 18 years later we are still talking about this same thing. What makes anyone think that we’ll come to an industry consensus when we haven’t come close for nearly the last two decades. This needs government action and we have the opportunity to get that action now by supporting the Aldous Bill.
As I write this opinion piece, the well-respected Building Magazine has just published an article on the Aldous Bill (prompted by the pushing back of its second reading to October) in which it states the number of MPs supporting the bill is now more than 170.
Among them are defence secretary Gavin Williamson, leader of the Liberal Democrats Vince Cable and former chancellor, Kenneth Clarke.
In addition, Building reports that there are more than 575,000 businesses and members of professional bodies supporting the proposal, as well as more industry bodies, including the Association of Accounting Technicians, and the British Chambers of Commerce.
I’d call on every other trade association within, or connected to, the construction industry to publicly voice their support for this bill. I’d urge members of Build UK to do the same. And I challenge those members of Build UK, who don’t support this bill, to hold their hands up and explain why.
During my first stint as president of the CFA, I was optimistic the abolition or ringfencing of retentions and fair payment terms for subcontractors would be achieved during my working life. As 18 years has already gone by since then, I’ve pretty much given up on that ambition. Unless the people with influence and power to effect the changes necessary are put under pressure to actually make those changes, I don’t believe I will see fair payment and the abolition of retentions happen anytime soon; not even by 2025 and probably not within my lifetime.
David Hibbert is immediate past president, CFA