On the 9 September, FIS hosted a meeting with the Department for Business and Trade to discuss the key elements of the the government’s consultation on late payments and retentions in the construction sector that was launched on 31 July.
FIS CEO, Iain McIlwee opened the meeting explaining that this is a once in a generational opportunity to get genuine legislative support from government as opposed to weakly enforced guidance. The consultation proposes nine measures to tackle late payments, including a 60-day maximum payment term, mandatory statutory interest, and a ban or protection mechanism for retention clauses.
The aim is to legislate to improve cash flow, reduce disputes and ensure fair payment practices.
Two main proposals for retentions were debated: a statutory ban on retention clauses and a protection scheme requiring retentions to be protected in a separate bank account or insured.
In this discussion it was highlighted that whilst the ban is attractive in principle, concerns were raised about retentions being replaced by expensive bonds and legal loopholes.
The digitalisation of trust accounts combined with automatic release on clearly defined dates associated with completion of works would potentially offer a more cost effective and practical solution. It was felt that this approach would also encourage clients to consider why they hold retention and how to manage quality and remove those companies that may be holding retention purely to retain working capital and seeking to profit from complexity in the current system
You can see the full session here.
FIS will be responding, but members are encouraged to feed their views into this consultation here