SMEs Demand New Safeguards After Carillion Collapse
17th January 2018.
Thousands of sub-contractors have been left in limbo over retention payments after Construction giant, Carillion, went into liquidation on Monday. These retention payments are held back by construction firms until a job is completed but are notoriously never returned to the worker. One such SME, A1 Flue Systems, which has products ready and waiting for a Carillion hospital project, is calling for a law change to safeguard these payments to suppliers. Retentions cause a multitude of cash flow issues for our Members at the Credit Protection Association, and these need to be rectified before another giant like Carillian collapses.
The proposal put forward by A1 Flue Systems calls for a formal deposit protection scheme for the retention funds, which will prevent them being used to boost the firm’s own cash flow.
The Nottinghamshire firm says this could help it recoup £750,000 across a variety of contracts and also help many others in similar cases.
Another subcontractor, currently working on a PFI project with Carillion, claims it is awaiting retention payments of around £200,000.
The SME is supporting efforts by MP Peter Aldous to amend the 1996 Construction Act and introduce more protection. Managing director TJ Duncan-Moir said: “Retentions can make a difference between profit or loss, but the system is a mess.”
Retentions are a real problem for sub-contractors. They were introduced in the firm’s interests, but have caused delayed payment and sluggish cash flow for others. Since Carillion collapsed, 30,000 businesses have lost out, and 20,000 employees’ jobs have been put at risk. SMEs are most affected by difficulties in payment and it’s important the Government sees them as a priority when accessing the fallout.
Nevertheless, firms do have other options for freeing up cash flow. Here at the Credit Protection Association, we offer a range of credit management products, from accessing credit ratings, chasing down late payers, all of which will help revive your business! Get in touch with CPA for help and advice.
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