The case for cash retentions is aired in parliament

February 23, 2016

 

 A lone email from a SELECT Member to his local MP helped in a recent debate about cash retentions at Westminster.

 

Neil McNicol, of John McNicol Electrical in Glasgow, sent a SELECT campaigning note on the matter to Alison Thewliss, SNP MP for Glasgow Central.

 

The MP then got in touch with SELECT’s Head of Membership and Communications, Alan Wilson, who apprised her of facts and figures to support the case to abolish the practice by big business, who hold on to project monies unfairly and to the detriment of smaller firms, many of whom are SELECT Members.

 

Neil said: “It was just a blanket email so I never expected it to go anywhere, but it was suprising and reassuring to note that our local MP paid attention to it, and it could help with the case.

“For us we steer away from dealing with the big construction firms because they are such a nightmare. It prevents us from doing business in those areas because why should we be treated like that?”

 

The debate on cash retentions in business transactions was held on January 27 in Westminster Hall following a motion lodged by the DUP MP David Simpson.

 

Opening the debate he pointed out that cash retentions – the practice of keeping back money by lead contractors from smaller subcontractors – cost those businesses £40million last year.

Alison Thewliss, who intervened in the proceedings, remarked that it’s a practice that is blighting the construction industry, saying: “If companies are ending up propping up larger businesses, they have less money to invest in education, training and innovation within their own business.”

The debate lasted for 30 minutes and was attended by the Minister for Small Business, Industry and Enterprise, Anna Soubry. She came under fire from, among others, Debbie Abrahams (Labour, Oldham East and Saddleworth), who has been closely involved in the campaign led by the Specialist Engineering Contractors’ Group (SEC) to stamp out the practice. Ms Abrahams argued that is wrong for the Minister to ignore her call last year for an amendment to the Small Business, Enterprise and Employment Act 2015, to specifically address cash retentions. She pressed for the subject to be given attention once again as a separate piece of legislation, the Enterprise Bill, which had its second reading in Parliament as CABLEtalk went to print. 

However, Ms Soubry urged MPs not to seek to amend the Enterprise Bill. She said a review is being overseen by Crossrail chief executive Andrew Wolstenholme who “absolutely understands the problem”. She said: “It will be an extensive review that will take evidence and look at evidence, but its work will not be completed until the end of this year, when its recommendations will go out for further consultation. I accept that it could be said that that is an inordinate length of time, but I promise that I will look at the time that we have currently given to that review, because there is a growing feeling among all parties that we really need to get on and sort it out.”

 

 

The Tesco files: lessons for the construction industry?

 

During the course of the debate the recent case of Tesco being found guilty of breaching the legally-binding Groceries Supply Code of Practice to protect groceries suppliers was raised. Tesco was found to have had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time, between 25 June 2013 to 5 February 2015. Groceries Code Adjudicator Christine Tacon was concerned about three key issues: Tesco making unilateral deductions from suppliers, the length of time taken to pay money due to suppliers and in some cases an intentional delay in paying suppliers.

 

Her five recommendations include stopping Tesco from making unilateral deductions from money owed for goods supplied. Suppliers will be given 30 days to challenge any proposed deduction and if challenged Tesco will not be entitled to make the deduction.

 

In the cash retentions debate Ms Soubry said: “I pay tribute to the Groceries Code Adjudicator. Bigger companies have got to learn and understand that none of us will tolerate their not playing fairly and properly, especially in relation to smaller businesses.”

 

She made reference to public sector agencies like the Highways Agency, which uses a project bank account approach, but said it’s not mandatory and she would be keen to “make progress” on the matter with her officials.

 

Whether an adjudicator ‘with teeth’ can be appointed in such a role to oversee often extremely poor payment practices in the construction industry remains to be seen.

 

Alison Thewliss MP debates cash retentions at Westminster

 

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