A proposed ban on cash retentions in construction contracts will return to Parliament this week as the Commercial Payments Bill reaches its final stage in the House of Lords.
UK Parliament confirmed on 16 October that the bill is scheduled for third reading on Tuesday 20 October. No amendments had been tabled ahead of the debate at the time of its announcement.
The bill would prohibit retention clauses in construction contracts, which allow a customer or main contractor to withhold part of a payment as security. It also proposes tougher commercial payment rules and wider powers for the Small Business Commissioner to deal with payment disputes and poor payment practices.
For scaffolding subcontractors, retentions can mean payments remain tied up after work has been completed. Removing them could make a difference to cashflow, although it is not yet clear what alternative guarantees or contractual protections clients might seek.
Two-year transition
The proposal would not take effect immediately if the bill becomes law. The latest bill text, as amended on 15 September, provides for a two-year transition beginning when the relevant retention provisions are brought into force. The start date would be set by regulations and has not been confirmed.
Under the current wording, new retention clauses agreed after that period would be void, even where attached to a contract entered into earlier. Separate provisions address variations of existing retention terms and outstanding sums held under transitional clauses. Those provisions are still subject to parliamentary approval.
Scaffmag reported the proposals when the bill was introduced in May. The legislation subsequently completed committee stage in July and report stage on 15 September.
Third reading is the last stage in the Lords. The bill would then need to go through the House of Commons and receive Royal Assent before becoming law. It could still change.
