Construction: Finance

Department for Business, Innovation and Skills written question – answered on 21st October 2015.

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Photo of Helen Jones Helen Jones Chair, Petitions Committee, Chair, Petitions Committee

To ask the Secretary of State for Business, Innovation and Skills, what estimate he has made of the total amount lost by small firms in the construction sector because of bankruptcies among firms holding cash retentions in each of the last five years.

Photo of Helen Jones Helen Jones Chair, Petitions Committee, Chair, Petitions Committee

To ask the Secretary of State for Business, Innovation and Skills, what assessment he has made of the effect of cash retentions on the viability of small businesses in the construction sector; and if he will make a statement.

Photo of Helen Jones Helen Jones Chair, Petitions Committee, Chair, Petitions Committee

To ask the Secretary of State for Business, Innovation and Skills, if he will make it his policy to ensure that cash retentions in the construction industry are placed in trust to safeguard them against possible bankruptcy; and if he will make a statement.

Photo of Nicholas Boles Nicholas Boles The Minister for Universities and Science, Minister of State (Department for Business, Innovation and Skills) (Jointly with the Department for Education)

The Government does not collect data on the different types of unsecured debts and the creditors to whom they are owed across the full range of formal insolvency procedures.

The Government acknowledges that some people are unhappy with the system of retentions as it stands, but it is an embedded feature of the construction industry.

Therefore, our general approach is towork with the industry through the Construction Leadership Council and its supply chain payment charter; endorsing its commitment to zero retentions by 2025. Achieving this commitment will involve far-reaching changes to the way the sector works.

It is not clear that requiring money to be placed in trust funds is the best way to overcome any shortcomings in the system of retentions: it would impose a financial burden on construction clients, many of whom are themselves small businesses, and where there is financial weakness, may itself make insolvency more likely. The Government is commissioning research on the costs and benefits of the retention system and alternatives, including the use of trust funds. This will inform future action.

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