In case you missed our seminar on 20 June 2018 in Reading with BESA (The Building Engineering Services Association), here is our summary of what was said, and the key take-away points from the event. There is also an accompanying video available below.
Five speakers presented to an audience at our Reading office on retentions, payments and your rights: Janet Shelley (Regional Manager, BESA), Alexi Ozorio (Public Affairs and Policy Manager, BESA), Debbie Petford (Head of Legal, BESA), Angus McAlpine (PayApps) and Ruth Wilkinson (Clarkslegal). BESA have been working hard to push through the Aldous bill on retentions, which aims to change the way payments are managed by requiring the use of retention deposit schemes. The second reading is scheduled on 26 October 2018.
The key takeaway points are:
Alexi’s role is primarily a political one. He aims to help BESA change policy through political lobbying and creating a groundswell of support. Alexi observed that there is now a triumvirate of events which have brought the issue of construction and payments to the forefront: Grenfell, Carillion and the Housing Crisis. Between them it’s hoped the events will be a catalyst to change.
However, Alexi noted that construction suffers from terrible fragmentation. People from professional bodies are reluctant to work together for change. But by working together change can be effected far more successfully. He explained how industry bodies across the sector representing the interest of SMEs and others have come together in support of the Aldous bill.
Debbie reminded us that retentions date back to the era of railway construction. In the late Victorian era, there was an explosion in contracting and poor quality workmanship was a real issue. In some instances, retention was up to 60% of the contract value. Retentions were identified as a bad idea as far back as World War II, possibly before that. Latham also noted the problems caused by retentions in his report of 1994.
Debbie observed that retentions are one part of a wide landscape of payment issues and cashflow being looked at by BESA. At present it is estimated that over £10.5Bn of SME working capital is locked into retentions. Another issue with retentions is that banks won’t lend against them, even though it is money that has been invoiced and work that has been completed.
Ruth emphasised that late and non payment are a huge source of dispute and gave a brief overview of the various measures currently available to try to ensure fair payment.
These measures included the provisions in the Construction Act aimed to ensure payments are made regularly and promptly and the right to adjudicate. She also covered: (i) the right to claim interest under the Late Payment legislation; (ii) signing up to the Payment Charter and Prompt Payment Code; and (iii) new reporting requirements on payment practices for companies and LLPs with turnover over £36m in the Small Business, Enterprise and Employment Act 2015 which came into force in April 2017.
Ruth also covered the various advantages of Project Bank Accounts (which can include retention monies), the practicalities of setting up PBAs and compared the take up in the public and private sectors. She questioned whether the take up will be affected by recent industry events.
Angus completed the session with a demonstration of software to process and review of payment applications between main contractor and subcontractor called PayApps. More details are here: https://uk.payapps.com/
Clarkslegal, specialist Construction lawyers in London, Reading and throughout the Thames Valley.
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