£300m Retentions Owed to Roofing Contractors

ROOFING AND CLADDING contractors are owed an average of 5.8% of their total turnover in retentions. Across the sector that is equivalent to £300m of cash, according to NFRC research.

The research findings come after the CLC committed to supporting a campaign for zero retentions last year.

Roofing Retentions

The commercial new build sector had the highest proportion of retentions with 6.9% of turnover cash tied up. But the public sector did not perform much better, with public sector new build clients holding 6.7%. Public sector repair and maintenance clients holding 6% of contractor’s turnover.

Cashflow is extremely tight for roofing contractors currently, as the Reverse Charge VAT changes in March affect firms’ working capital. On top of this, roofing firms are facing record material price rises.

In NFRC’s survey of 200 members, 89% of companies saw material prices rise in Q1 2021, as well as soaring professional indemnity (PI) insurance premiums. Additionally, Bounce Back Loans need repaying from June.

Meanwhile less than half of NFRC members were paid on time. Only 42% were paid in 30 days despite 62% of roofing firms having 30 day terms.

Cashflow Crunch

James Talman CEO NFRC

James Talman, CEO of NFRC said: “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 subcontractors 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. 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quality that doesn’t tie up so much of a subcontractor’s working capital, yet the industry clings onto this outdated system.

“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”.

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