In short, any change remains some way off. The Government will consult further before taking a final decision on implementation, acknowledging the "ambition of the policy". Industry participants and other interested parties can therefore expect further opportunities to engage with and influence the shape of the final proposals. One focus area may be how retentions are defined in the legislation. For example, broad drafting may have unintended consequences. Could it ban the practice of withholding monies until a performance bond, parent company guarantee or key collateral warranties are delivered? If so, how will these risks be addressed?

Steps to Implement

Following consultation, any final decision would then need to make its way through Parliament. Given the breadth and complexity of the measures proposed, this is likely to involve detailed scrutiny at committee stage and may attract significant debate. It is reasonable to expect that the full legislative process could take a considerable period.

Transition Period

Even once legislation is enacted, there is likely to be a 12-24 month[1] transition period to allow businesses time to adapt their contractual arrangements, procurement processes, and supply chain relationships. Publishers of standard form contracts, such as the JCT and NEC will also need time to publish any necessary amendments to their contracts. For example, some JCT contracts specify an interest rate of 5% above the Bank of England’s official rate and apply a default 3% retention rate unless a value is specified in the contract particulars. The length of any transition period has not yet been confirmed, but given the scale of the changes proposed, a meaningful lead-in time would be expected. Practical Steps and Recommendations

Although the timeline for implementation remains uncertain, businesses operating in the construction sector and wider supply chains would be well advised to begin preparing now. In particular, it may be sensible to review current contractual arrangements to understand the extent of reliance on cash retentions and to identify clauses in templates that may need to be amended in due course. Engaging with supply chain partners on alternative security arrangements such as retention bonds, extending performance bonds which may otherwise expire at practical completion, parent company guarantees and other measures will also help to ensure a smoother transition when the time comes. It is equally important to consider the impact of the wider payment reforms on procurement strategies and tender documentation. The introduction of maximum payment terms, mandatory interest on late payments, and statutory deadlines for disputing invoices will all require adjustments to standard commercial processes.