Retention: the money that dies

Somewhere between three and six billion pounds of subcontractors' money is being held back in retentions at any given time in England alone. That's not my number, it's the government's, from its own consultation into the practice. Hold that figure in your head for a minute while we talk about what retention actually is, because the industry has been calling it normal for so long that nobody stops to look at it straight.

Retention is a slice of every payment you've earned, typically five per cent, kept back by the party above you. Not because your work is in doubt on any particular day but as a matter of standing policy, insurance against defects you haven't caused yet. You've done the work. The money is yours in every sense that matters. And it sits on somebody else's balance sheet, interest free, sometimes for years past completion, waiting on release triggers that are often tied to events on the main contract you can't see and can't influence. Strip away the familiarity and it's an involuntary unsecured loan from the smallest firms in the chain to the largest, renewed on every job, forever.

Unsecured is the word that matters, because some of this money doesn't come back at all. Government-commissioned research found that in a three year period roughly £230 million of retention was simply lost to upstream insolvencies. The firms holding it went under and the money went with them. Then came the collapse that put the problem on the news: Carillion went down holding around £800 million in retentions, most of which its supply chain had to write off. Every one of those pounds had been earned by somebody, on work long since finished, held back as a formality until the formality became a funeral.

And insolvency is only the loudest of the three ways retention dies. The second is quieter: release conditions that never quite trigger, defects lists refreshed at the right moment, the final certificate on a main contract you're not party to sitting unissued for reasons nobody will put in writing. The third is quieter still and I'd bet it's the biggest: the sums that are simply never chased to the end, because by the second year after completion the QS who knew the job has moved on, the file is in a box and the cost of pursuing the last few thousand outgrows the sum itself. Most subcontractors, if asked for a single list of every retention owed across every completed job, with dates and triggers, would be less than clear on the answer from my experience.

Which points at the Monday discipline, because there is one and it's not glamorous. Retention belongs on a ledger, not in a drawer. Every job, the amount held, the contractual release triggers with dates attached, who holds it and when it was last chased, with the chasing done as a formal application rather than a friendly reminder at the end of a phone call. The rules of the game may genuinely be changing, reporting requirements are now in force and reform of the whole practice is under live consultation, which makes this exactly the moment to know your own number. Because the firms that get their money back are, boringly and always, the ones who can say precisely what they're owed and precisely when it fell due.

So, the question: what's your retention number, across every job you've ever finished? If nobody in the building can answer that today, some of that money is already dying quietly, and it was never the client's money at all. It was yours.

Figures: HM Government consultation on retention payments in construction (2017), which put retentions held in England at £3.3–5.9bn; research by Pye Tait for BEIS (2017) on losses to upstream insolvency; reported figures on the Carillion liquidation (2018). Reform of retentions and late payment is under active government consultation at the time of writing.