£300m of roofing contractors’ cash tied up in retentions

A total of £300m of roofing contractors’ cash is tied up in retentions across the construction sector.

That’s according to the National Federation of Roofing Contractors (NFRC) which has found that on average, 5.8% of roofing and cladding contractors’ total turnover is held in retentions.

The finding comes despite a Construction Leadership Council commitment for the construction industry to move towards the objective of zero retentions by 2023, moving to zero retentions by 2025.

The commercial new build sector had the highest proportion of turnover tied up at 6.9%, with public sector new build clients holding 6.7% and public sector repair and maintenance clients holding 6%.

A total of 200 roofing contractors responded to the NFRC’s March survey. The figures are based on an estimated total roofing industry annual turnover of £5bn.

The NFRC warned that cashflow is tight for roofing contractors, as the Reverse Charge VAT changes introduced in March start to restrict firms’ working capital. Roofing firms are also facing record material price rises, with 89% of companies seeing material prices rise in the first quarter of the year, as well as soaring PI insurance premiums. Any firms who took out Bounce Back Loans will also have to start paying these back from June.

Meanwhile, the NFRC found that only 42% of roofing firms were paid within 30 days or fewer. Almost one if five (18%) had payment terms of 46 – 60 days.

James Talman, CEO of NFRC said: "Our industry is being asked to build more and more but with less and less cash. It is only a matter of time before there will be a cashflow crunch, and firms will start going to the wall. This is not just a problem for roofing, but for sub-contractors across the industry – £300m is just a snapshot, and this figure is likely to be in the billions of pounds across all the trades.

"It has been widely acknowledged that cash retentions generally do not provide an appropriate or proportionate way of ensuring quality, but yet it is clear from this data that their use is still widespread – even in the public sector. There are many, much more appropriate ways of guaranteeing quality that doesn’t tie up so much of a sub-contractor’s working capital, yet the industry clings onto this outdated system.”

He concluded: "The government must set the example by removing retentions entirely from all its own contracts – as well as through any government-supported schemes such as Help-to-Buy. We need more than just high-level statements, but firm commitments. With 2023 less than 20 months away, private sector clients should start committing to zero-retentions now or at least set out their own roadmaps to getting there. We are willing to work with any clients who wish to explore alternative ways of ensuring quality in the roofing industry".