Construction minister Richard Harrington gave a speech to the Construction News Summit on 20 November in which he indicated that the government would make an announcement on changes to the law in relation to retentions “very soon”.

Reform of the law on retentions has been on the agenda for some time now. The government has yet to publish a response to the consultation on “Retention payments in the construction industry” which closed in January.

Meanwhile, a head of steam has been building up behind a separate private member bill proposed by Peter Aldous MP, a former surveyor.

Aldous’ proposed Construction (Retention Deposit Schemes) Bill, would not outlaw retentions altogether (something Harrington in his comments also appears to have ruled out). The bill would instead require any retention monies (including any retentions being withheld whilst collateral warranties, performance bonds or health and safety information are outstanding) to be placed on deposit under a new “retention deposit scheme”.

It remains to be seen to what extent the government’s proposals would resemble the Aldous bill, but it is worth noting that:

- his bill has the public backing of almost 40 per cent of MPs (the second reading of the bill has recently been pushed back for a fourth time and is now pencilled in for 25 January 2019); and

- a report prepared by Pye Tait for the Department of Business, Energy and Industrial Strategy prior to publication of the government’s consultation paper, concluded that a retention deposit scheme approach would merit further investigation.

Critics of the proposed reforms have highlighted:

  • concerns in relation to operating costs and the extent of the administration required, especially given the multi-tiered nature of the construction industry;
  • the costs associated with alternative forms of security (e.g. retention bonds) if retentions are no longer going to be an option; and
  • the impact on project funding (in particular in light of the more cautious approach already being taken by many providers of development finance following the collapse of Carillion) and the likelihood of the costs of such funding increasing.

Harrington’s latest indication that retention reform is moving up the agenda is consistent with other statements he has made recently. Building Magazine on 2 November reported him as saying, “A voluntary code only works for people who agree with it. I’m not going to faff around. We’ve got to decide in the next few weeks which way to jump.”