Engineering services alliance responds to retentions reporting legislation

Actuate UK welcomes retentions reporting legislation

Engineering services alliance, Actuate UK, has warmly welcomed the new secondary legislation introduced in Parliament by the UK Government, which will require reporting of cash retentions held by the large construction companies under the Payment Reporting Regulations.

This follows changes to the reporting of payment in the Regulations which are coming into effect in 2025 and the Government’s announcement for measures to strengthen enforcement of payment reporting and introduce a Fair Payment Code.

Poor cashflow due to late payments and the holding of retentions is already a major issue in engineering services companies; construction still holds the unfortunate first as the sector of the UK’s economy with more reported insolvencies. A research project commissioned by the Department of Business and Trade, published last month, confirmed that late payment is passed on down the supply chain, making the cashflow issues more acute particularly in the SMEs. 

Actuate UK has continuously campaigned for strengthening of the prompt payment measures and the office of the Small Business Commissioner so that repeat late payers are identified and fined. We will present our views in the forthcoming Government consultation on what other legislative measures could be taken to tackle these pressing payment issues.  

Rob Driscoll, ECA Director of Legal & Business, commented on behalf of the Business Group of Actuate UK: “This is a monumental step forward on the road to reform of cash-retentions. We already know from our work with Government designing the payment reporting requirements that transparency moves culture and spotlights bad behavior, as well as providing the metrics required to exclude poor performers from public sector procurement.

In the wake of a 53% rise in insolvencies since 2020 and the seismic impact of the collapse of ISG that will be felt over the coming months, lifting the lid on the truth of cash-retentions is critical to Government’s objectives of improving fairness and unlocking growth for SMEs.”

Debbie Petford BESA's director of legal and commercial affairs and member of the Actuate UK Business Group also welcomed the new rule:

“Reporting on retentions as part of the payment reporting requirements is a welcome step. Given recent events in the construction sector, with the Phase 2 Grenfell Inquiry Report laid bare and the collapse of ISG, the business environment that specialist contactors face is critical to their survival. We see the headlines, but the ramifications are felt far down the supply chains, putting more pressure on smaller companies. 

Late payments must remain at the top of the Government agenda to address the necessary culture change.”  

The Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024 was laid in Parliament on 7th October 2024 as a Statutory Instrument for Affirmation. Details here.

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