The Building Engineering Services Association (BESA) has welcomed the government’s decision to move forward with a ban on retentions in construction contracts, describing it as a landmark and long-awaited victory for specialist contractors across the UK.
The announcement follows the government’s Late Payments Consultation, which has proposed prohibiting the withholding of retentions as part of what is being described as the most comprehensive set of payment reforms introduced this century.
BESA, which has been lobbying for reform on retentions and late payment practices for many years, played an active role in shaping the consultation. Representatives from the Department for Business and Trade, attended BESA’s Council meeting in September to hear directly from members about the damaging impact of retentions and poor payment culture across the industry. The Association also submitted a detailed response to the consultation at the end of last year.
The consultation attracted significant engagement, with more than 850 formal responses, a large proportion from the construction and engineering services sector, underlining the scale and urgency of the issue.
Alongside the proposed ban on retentions, the government has set out a package of measures to improve payment practices, including a maximum 60-day payment term, mandatory interest on late payments, and stronger powers for the Small Business Commissioner to investigate and penalise poor payment behaviour.
David Frise, Chief Executive of BESA, said:
“This is a landmark moment for our industry and a hugely significant step forward for BESA members and the wider engineering services sector. We have been campaigning for many years to end the unfair and outdated practice of retentions, which has placed an unacceptable financial burden on specialist contractors.
“The government has listened to the concerns of our members and the wider industry. This decision has the potential to transform cashflow, improve business resilience, and create a fairer, more sustainable supply chain.
“It is particularly encouraging that policymakers engaged directly with our members during the consultation process. That real-world insight has clearly helped shape a more robust and meaningful response.”
The issue of retentions has long been a major concern for SMEs in construction, with many businesses suffering from withheld payments, delayed release of funds, and in some cases losing retention money entirely due to upstream insolvencies.
Debbie Petford, Legal and Commercial Director at BESA, added:
“We have been waiting a long time for meaningful reform backed by legislation, and the proposed ban on retentions is a critical part of that. Too many businesses have struggled or failed because they have been denied the lifeblood of healthy cashflow.
“This consultation was a once in a generation opportunity to address poor payment practices, and it is extremely positive to see the government taking decisive action. The collapse of major firms in recent years has only reinforced how vulnerable smaller contractors are within the supply chain.
“While there is still work to do on implementation, this is a major step towards creating a business environment where firms can thrive, not just survive.”
The government has indicated that further consultation will take place on how the ban will be implemented, including transition periods and ensuring a clear and robust definition of retentions to prevent their reintroduction in other forms. Legislation is expected to follow when parliamentary time allows, although implementation is likely to take up to two years.
BESA is encouraging its members and the wider industry to continue engaging with the process to ensure the final framework delivers meaningful and lasting change.