Overview

This bill aims to abolish the practice of withholding payments (retentions) in construction contracts in England and Wales. Currently, clients often withhold a percentage of payments to subcontractors as security against potential non-performance. This bill seeks to eliminate this practice, ensuring that subcontractors receive all due payments promptly.

Description

The Construction (Retentions Abolition) Act 2021 amends the Housing Grants, Construction and Regeneration Act 1996. It makes any clause in a construction contract (entered into after the Act's passing) that allows for the withholding of retentions void. This includes clauses in primary contracts and any additional agreements designed to achieve the same effect. The bill defines "retentions" as monies withheld to secure the contractor's performance. After the bill comes into force (January 1st, 2025), any withheld retentions must be paid within 7 working days of their due date.

Government Spending

The bill is not expected to directly increase or decrease government spending. The impact is primarily on the private sector, shifting the financial risk from subcontractors to other mechanisms, potentially impacting the cost of insurance or bonding.

Groups Affected

This bill significantly impacts:
•Subcontractors: They will receive payments more promptly, improving their cash flow and reducing financial risk.
•Main Contractors/Clients: They will lose the security provided by retentions, potentially needing alternative risk mitigation strategies (e.g., increased insurance premiums).
•Insurers: Likely to see changes in demand for surety bonds and construction insurance.

Powered by nyModel