Appearing on last week’s Electrical Show, hosted by Thomas Nagy, Select managing director, Alan Wilson said, “we would like the government to put money into trust in the short-term, and then come up with a long-term solution that will remove retention altogether.”

An independent Scottish government report published at the start August recommended ending retention payments to deliver “an essential financial lifeline” for contractors.

Select, the largest construction trade association in Scotland has enthusiastically embraced the report’s findings, calling it a “potential game changer.”

“We feel that retention is an outdated mode of completion – they are clunky, difficult, and they especially penalise small businesses. They have become an opportunity for people to effectively gain more cash from subcontractors,” explained Wilson.

Retention – whereby money is held back from the subcontractor to ensure work is delivered to an agreed standard – is commonly abused. The final payment is often delayed, even after work is completed, or just never happens.

“Businesses know they can play the system,” said Wilson on the show.

“We often hear through the industry or our members, that they will be offered a sum of money, but not the full amount, to go away. If your retention is due in 12 months, and it takes 36 months to get paid, you’re probably glad to get something rather than nothing,” he added.

Small and medium businesses rarely have the resources to chase retention payments. When you’re running a business, and ‘working on the tools’ there is little time to chase client payments. As Thomas Nagy said during the show “it just isn’t worth it.”

Retention also ties up money that could be used to invest and grow a business.

“Retention is just money soaked out of the industry… that is money taken out of the sector that cannot be used for reinvestment,” said Wilson. “The industry is suffering because of that,” he added.

Despite broad support across the construction sector to do away with retention payments – Build UK would also like to see the practice stopped – any solution will have to encompass all stakeholders, including clients and tier one and two contractors, to prevent ‘alternative’ solutions appearing.

For example, when New Mexico banned retention, lawyers simply replaced it with a ‘contract completion guarantee fund’.

Northern Ireland has developed a two-step system to police contractors, that want to work on public sector projects. Organisations that are either not paying on time, or are slow to release retention payments can be reported and given a 'yellow card’ warning. If they persist, they can be issued with ‘red card’ and banned from bidding on public sector works.

“In Norther Ireland, [the public sector] is a big part of the construction spend. This is the carrot and the stick, and that is a big stick to hit someone over the head with,” said Wilson.