Retention Reform: A Potential Turning Point For UK Construction?

Retention is a long-established form of performance security and feature of UK construction contracts, whereby the client (or upstream contractor) will withhold a certain percentage of the contract sum from the contractor (or sub-contractor) until practical completion and/or the expiration of the defects liability period.

The rationale is to provide security against non-performance under the terms of the main contract/sub-contract including defective works. You can read our previous article on retention here.

However, for many in the industry, especially small and medium sized businesses (SMEs) with limited bargaining power and tighter cashflow, retentions are problematic. With an estimated sum of around £3.2 billion to £5.9 billion held in retention annually (in England), research such as that from the Pye Tait Consultancy and the BEIS report illustrate several key issues: