The average rate of retention withheld by tier one contractors is 2%, according to new figures industry body Build UK.
The body is collating data from its 41 member companies and non-members since new reporting requirements for such information were introduced by the government last year. The 2% figure just covers Build UK members and the group said it was committed to tracking and benchmarking this data in future.
The average retention rate is calculated by dividing the sum of retentions withheld by the sum of gross payments made under qualifying construction contracts during the six-month reporting period and multiplying it by 100.
The data also shows that due to retentions withheld against them by their clients, contractors are currently withholding on average 74% from their own supply chains, absorbing the remaining 26% themselves. Build UK said this demonstrated “the significant impact of retentions on cashflow at all tiers of the construction supply chain”.
Three contractors retention-free
Three contractors in the analysis - non-Build UK members Eurovia, Colas and Ferrovial - do not use retentions which the body said was down to the sectors they work in. Retentions are not typically used in road or rail contracts.
The government has proposed to withhold retention payments in construction as part of the Commercial Payments Bill which is currently progressing through Parliament.
Build UK has been benchmarking its members and the wider industry on payment performance since 2018.
This data shows the average time taken to pay invoices by contractor has reduced from 45 days to 29 days, and the percentage of invoices paid within 60 days has risen from 82% to 96% during this period.
Build UK deputy chief executive Jo Fautley said: “The ban on retentions in the Commercial Payments Bill will not only address the issues with payment but encourage collaboration and require the sector to manage quality in a more effective way.”
Paul Beeston, Construction Leadership Council Industry sponsor for business model reform, said: “Build UK's benchmarking provides an important baseline against which progress can be measured as the industry evolves its commercial practices.”
