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SEC Group: insolvencies require “urgent" payment protection action

Organisation will press for legislative changes in parliament over retentions and project bank account use to tackle concerns over new ONS figures on construction sector insolvency

Urgent action to ensure better payment security within the construction and building services sector is required to tackle fears over thousands of industry insolvencies over the last year. 

The Specialist Engineering Contractors’ (SEC) Group has expressed alarm at 3,013 recorded company insolvencies that have occurred over the last twelve months. The figures are based on findings from the Office for National Statistics (ONS).

The figures follow attempts in recent years to try and introduce new regulations that would ensure payments owed for building services work are protected against upstream insolvency, such as that witnessed with the fall of Carillion last year.

RudI Klein, chief executive of the SEC Group, has argued that the recorded number of insolvencies in the construction sector during the last twelve months were the highest for any business sector in the UK over the period.

He said, “Insolvencies in the industry are running at their highest rate since the recession. Whilst some can be put down to the continuing fall-out from Carillion’s demise, many are the result of worsening cashflow and widespread payment abuse.”

“I’m disappointed that, after almost 18 months following the Carillion collapse, we are still waiting for decisive action on payment.”

SEC Group noted that it had supported two Private Members’ Bills in the House of Commons to try and push for reforms.

These include a Construction (Retention Deposit Schemes) Bill introduced into parliament by Waveney MP Peter Aldous in January 2018.

The bill seeks to make it a legal requirement for any cash retentions to be held in an approved third party deposit scheme to ensure money owed for completed work is paid to the correct party.  However, subsequent hearings of the proposed legislation have been postponed multiple times.

MP Debbie Abrahams earlier this year used the Ten-Minute Rule Bill to put forward proposals to parliament on requiring the use of shared project bank accounts to better protect and manage cashflow and retentions for industries such as the construction sector.

SEC Group said that it was now committed to further pursue the introduction of these potential legislative changes during the next session of parliament in order to address payment concerns.

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