BESA welcomes government move to ban retentions

UK – A government move to ban retentions in construction contracts is being hailed by the Building Engineering Services Association (BESA) as a long overdue shift in commercial risk and cashflow for specialist firms, with direct implications for heat pump and low carbon installation work.

The change forms part of a wider package arising from the Late Payments Consultation, which proposes prohibiting the withholding of retentions alongside a maximum 60‑day payment term, mandatory interest on late payments, and enhanced powers for the Small Business Commissioner. More than 850 formal responses were received, many from construction and engineering services businesses, signalling strong sector pressure for reform.

BESA, which has lobbied on retentions and late payment for years, argues that removing retentions could materially improve liquidity and resilience for SMEs delivering complex M&E packages, including heat pump systems and heat networks. The association says long‑term withholding of retention and losses linked to upstream insolvencies have undermined investment in skills, innovation and productivity across building services.

Further consultation is expected on the mechanics of the ban, including transition periods and a clear definition of what constitutes a retention to avoid the practice re‑emerging under different labels. Legislation will follow when parliamentary time allows and implementation could take up to two years, meaning contractors should continue to scrutinise payment terms on current and near‑term heat pump projects.

BESA is urging firms to stay engaged with the process to help shape a framework that delivers predictable cashflow and fairer allocation of risk through the supply chain. For heat pump contractors operating on tight margins and facing rising training and compliance costs, the final design of these reforms will be critical to business planning and capacity growth.

Key points

• Government to proceed with a ban on retentions in construction contracts, following its Late Payments Consultation.
• Package includes maximum 60‑day terms, mandatory interest on late payments and stronger enforcement by the Small Business Commissioner.
• BESA says reform could significantly improve cashflow and resilience for specialist contractors, including heat pump installers.
• Retentions have historically exposed SMEs to losses where funds are withheld or lost in upstream insolvencies.
• Further consultation will shape definitions, transition and implementation; full rollout may take up to two years.

Source:
https://www.thebesa.com/besa-latest-news/ban-retentions-construction