Scotland's Economy

Improving construction industry payments

December 18, 2018 by kristenmcnicoll No Comments | Category Business, Economy

Cash retention – the practice of withholding a percentage of the payment on construction projects – will be among the issues considered as part of a Scottish Government consultation planned in 2019.

The use of cash retentions in the construction industry is commonplace and when used properly is an effective project assurance tool. However, many in the industry have expressed concern around the use and abuse of retentions in contracts.

Prompt and fair payment has been a long standing issue and many in the sector consider some practices to be barriers to investment, productivity improvement and growth.

Announcing the intention to consult in spring 2019, Minister for Business Jamie Hepburn said:

“Cash retention in construction industry contracts is common practice, including in the public sector. Its purpose is to ensure the contractor completes the job. However, it must be used proportionately and responsibly.

“The Scottish Government believes in fair and transparent working practices and a culture that supports prompt payment is essential to secure investment and jobs. Having listened to the construction industry’s concerns, a public consultation on the use of retentions in construction contracts will take place in spring next year.

“The Economic Action Plan sets out our intention to step up our engagement with the construction sector to support its plans to develop and grow a more sustainable, productive and innovative industry. This consultation is just one part of that.”

Ken Gillespie, Chair of Construction Scotland said: “Construction Scotland welcomes the Economic Action Plan’s intention to step up engagement with the construction sector and believes that, in the case of retentions, the aim should be to see them abolished completely by 2023.

“The failings in the system are widely recognised and there have been many calls for the industry’s customers and contractors to end their use. These have failed to gain traction, due principally to the lack of experience of, or research into, the use of alternative forms of project assurance.

“It is to be hoped that the newly announced research project will fill at least some of those gaps in knowledge. It is disappointing that the UK Government have not yet published the results of their own consultation into the use of retentions in England, which closed in February 2018, and against that background, the new Scottish Government consultation is a welcome development, if it results in a speedier identification of a solution that works for everyone.”

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