The announcement, which BESA has described as ‘a landmark and long-awaited victory for specialist contractors across the UK’ follows the government’s Late Payments Consultation.
The consultation attracted significant engagement, with more than 850 formal responses. Representatives from the Department for Business and Trade attended BESA’s Council meeting in September to hear directly from members about the damaging impact of retentions and poor payment culture across the industry.
Alongside the proposed ban on retentions, the government has set out a package of measures to improve payment practices, including a maximum 60-day payment term, mandatory interest on late payments, and stronger powers for the Small Business Commissioner to investigate and penalise poor payment behaviour.
The issue of retentions has long been a major concern for SMEs in construction, with many businesses suffering from withheld payments, delayed release of funds, and in some cases losing retention money entirely due to upstream insolvencies.
The government has indicated that further consultation will take place on how the ban will be implemented. BESA is encouraging its members and the wider industry to continue engaging with the process to ensure the final framework delivers meaningful and lasting change.
BESA chief executive David Frise said: “This is a landmark moment for our industry and a hugely significant step forward for BESA members and the wider building services engineering sector. We have been campaigning for many years to end the unfair and outdated practice of retentions, which has placed an unacceptable financial burden on specialist contractors.
“The government has listened to the concerns of our members and the wider industry. This decision has the potential to transform cashflow, improve business resilience, and create a fairer, more sustainable supply chain.
“It is particularly encouraging that policymakers engaged directly with our members during the consultation process. That real-world insight has clearly helped shape a more robust and meaningful response.”
Debbie Petford, legal and commercial director at BESA, added: “We have been waiting a long time for meaningful reform backed by legislation, and the proposed ban on retentions is a critical part of that. Too many businesses have struggled or failed because they have been denied the lifeblood of healthy cashflow.
“This consultation was a once in a generation opportunity to address poor payment practices, and it is extremely positive to see the government taking decisive action. The collapse of major firms in recent years has only reinforced how vulnerable smaller contractors are within the supply chain.
“While there is still work to do on implementation, this is a major step towards creating a business environment where firms can thrive, not just survive.”