NFRC Members Demand Retentions Ban and Faster Payment Terms

AT A WEBINAR last week NFRC members called for all retentions to be banned.

The meeting discussed new government proposals to tackle late payments and retentions in construction.

Hosted by the National Federation of Roofing Contractors (NFRC) and the Department for Business and Trade (DBT), around 40 NFRC members heard about the government consultation on the proposals and discussed their views.

NFRC is urging everyone in the UK roofing industry to respond and have their say on late, long and disputed payments, as well as retention clauses in construction contracts. The consultation closes on 23 October 2025.

Late and Retained Payments Proposals

During the webinar, DBT explained the proposed measures:

1. Audit & board scrutiny (large companies): More structured board/audit-committee oversight of payment practices.
2. Maximum payment terms: A fixed ceiling of 60 days for payment terms across sectors (with the potential to reduce to 45 days in 5 years).
3. Deadline to dispute invoices: A defined verification period of 30 days after which undisputed invoices are automatically payable (including statutory interest).
4. Mandatory statutory interest: Late payments to carry a mandatory interest rate (e.g. 8% above base) rather than left to discretion.
5. Reporting on statutory interest (large companies): Large reporters to publish the interest they owe vs. that which they have actually paid.
6. Penalties for persistent late payers (large companies): Use published data to identify and fine repeat offenders.
7. Stronger Small Business Commissioner: Assurance of reported data and power to initiate investigations (note: construction adjudication remains separate).
8. Retentions in construction contracts (two options):

• Option A — Ban retentions: Amend the Construction Act to prohibit retention clauses in new contracts after a transition period. Alternative protection against defects would be left to the market.
• Option B — Protect retention sums: Allow retentions only if immediately protected (trust) via a segregated account and/or an instrument of guarantee. Proposed features include:
• Single deduction (one retention sum only) around final payment, covering the defects period.
• Automatic segregation and automatic release at due date unless notified defects.
• Interest earned belongs to the payee.
• Records/reporting, existing Construction Act dispute routes, and implied terms where contracts are silent.

NFRC Members Back Retentions Ban

NFRC members at the webinar showed clear support for the abolition of retentions.

With observations from members such as, “retentions are abused like all systems”, most favoured banning retentions entirely (65%), while around third supported protecting retention funds in segregated accounts (31%).

None of those present favoured leaving retentions unchanged, with one NFRC member commenting, “I don’t think there should be a retention… it’s just holding up the construction industry.”

NFRC’s position is to seek the abolition of retentions entirely, though the trade association says it recognises that some members prefer protection and this will be reflected in their consultation response.

If a protection scheme is implemented, contractors at the webinar insisted on the importance of automatic release of monies owed, interest being paid to the subcontractor, and clear triggers for payments being visible to subcontractors.

However, there were concerns about how a protected retention fund would work in practice with questions raised including “how would a single deduction be calculated if it’s not taken through the job?”

Another member stated that “we already insist on first and second release dates in our contracts. It stops arguments and gets the money released.”

The added cost of a protection scheme was another concern and one contractor warned, “the facilitation costs of a protection scheme will just add friction and hit margins.”

NFRC members also called for greater transparency around practical completion. Several said that they often cannot verify the date of main-contract practical completion and the end of the defects period, yet their releases remain tied to these milestones.

60-day Ceiling for Payments Too Long

Roofing contractors raised alarm about the proposed fixed 60-day ceiling for all payments. Under current rules, even the 60-day limit can be contractually extended if the alternative is not deemed ‘grossly unfair’, leaving the rule toothless.

“Companies are using subcontractors as financial tools, it has to stop. No more than 30 days,” said one contractor.

“If you set 60 days, everyone will just go to 60 and say they’re within the rules,” added another.

Members feared a 60-day ceiling could still be abused, particularly if tighter rules on retentions and payment lead to some businesses seeking cash elsewhere, such as through maxing out extended payment periods.

The effect on cashflow was a clear concern: “60-day payments would restrict cash flow to dangerously low levels. If the main contractors have the option of 60 days, they will use this”, a NFRC member commented.

Close the Loopholes

NFRC continues to support the government’s proposal to close the loophole that allows payment terms to exceed 60 days. The issue affects around 8% of NFRC members who consistently report actual payment terms exceeding 60 days. NFRC says it will intensify its calls for government to act more quickly and decisively to shorten payment terms.

Have Your Say

NFRC is urging everyone in the roofing industry to respond to the government’s consultation on the proposed changes to construction payments law.

The organisation hopes responses will help shape a fairer, more efficient payment culture across construction. It comments that this is not only good for roofing businesses, but also an essential adjustment needed if the UK has any hope at all of hitting lofty housing and infrastructure targets set by the government.

Businesses and individuals can respond directly to the consultation here.

NFRC has also compiled a suite of guidance documents to assist with responses, freely available to all.

The consultation is UK-wide and includes the devolved nations. Anyone can respond as an individual or as a representative of their business.

Answering questions at the webinar for the DBT were Fergus Harradence, Deputy Director for Construction, Logistics, Airports and Water; Nicola Walters, Business Environment Lead for Construction and Infrastructure; and Hannah Black, Analyst.

James Talman, NFRC Chief Executive

NFRC Chief Executive James Talman said: “We finally have a real chance to change the law on late payment and retentions, but we need your voice.

“The Government is proposing major reforms that could make a real difference. Those who benefit from the current system are working to stop these law changes, so you need to show your support for change.

“This is your opportunity to help shape the future of payment practices in construction. Every response counts, and silence will only help those who want things to stay the same.”

>> Read more about retentions in the news