Template letter to prospective MPs
[date] 2017
Dear [insert name of elected MP]
Cash Retentions in the Construction Industry
I would like to congratulate you on your recent electoral victory and introduce myself and ask fr your support on an issue which is crucial for my business in your constituency. I [work for/am a manager/director of/own]a construction-based business involved in [insertbusiness activity] in [area/constituency].
I hope you will be able to confirm support for a measurewhich can secure payment of construction industry cash retentions and in doing sohelp to improve the viability and performance of thousands of businesses like mine, most of which are SMEs.
Up to 5% (and sometimes more) of the contract value is withheld from a firm’s account by way of a retention. These monies are – ostensibly – deducted as security in case a firm does not return to remedy defects. In practice they are used to bolster the (usually) inadequate cash position of the paying party. It’s an archaic practice unique to the construction industry which deprives firms like mine of essential working capital. A consequence is that these monies are often not released until long after handover of the work during which time they are always at risk from insolvencies up the supply chain.
At any one time over £3 billion of retentions monies are outstanding in the construction industry-to individual businesses they often represent their entire profit margin. Time spent on attempting to secure payment creates significant overhead and diverts effort which would otherwise be applied to improving business performance and growing business operations all of which increases resource available and creates employment opportunities across the construction industry.
To quotethe HMRC (extract from HMRC’s internal Business Income Manual):
“In recent years, construction industry customers have become increasingly reluctant to pay retention monies, irrespective of whether they are defects to be made good. It is now common for such monies never to get paid”.
[You may wish to provide here some information about the impact that cash retentions has on your business such as any losses arising from upstream insolvencies.]
Many other countries (such as the United States, Australia, New Zealand, France and Germany) have legislation which protects cash retentions and the need for similar arrangements in the UK has been recognised through a long-standing government intention to publish a report/consultation on the subject.Inevitably this has been disrupted by the recent general election meaning the proposals will need renewed support from a new parliament. It is too important an issue for us to delay further.
The measure on which I’m therefore seeking your support is a commitment to seeing introduction of legislation which ring-fences cash retentions so protecting them from upstream insolvency.Specifically,any party procuring construction works and requiring a cash retention should be subject to a statutory duty to place them in trust until they are due to be released.
This would not prevent recourse to the monies in the event of a firm’s refusal to return to rectify any defects.I should add that this measure would not apply to domestic households
More information can be provided if required but if you have sufficientI look forward to receiving confirmation that you will be able to support this proposal and, if you have the opportunity, see it through to implementation. An email response to [your email address] will be appreciated - you can be sure it will be welcomed amongst colleagues and others operating across my business sector.
Thanks in anticipation of a positive reply and congratulations again on your election..