Roofing and cladding contractors have on average 5.8% of their total turnover held in retention, which across the whole sector is equivalent to £300 million in cash, research from the National Federation of Roofing Contractors (NFRC) has found.
This is despite the industry committing to having zero retentions in less than 20 months in 2023, with 2025 at the absolute latest.
The commercial newbuild sector had the highest proportion of turnover tied up at 6.9%, with public sector newbuild clients holding 6.7% and 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 introduced in March have started to restrict firms’ working capital. Additionally, roofing firms are facing record material price rises, with 89% of companies seeing material prices rise in the first quarter of the year, as well as soaring PI insurance premiums. Any firms that took out Bounce Back Loans will also have to start repaying these from June.
Meanwhile, despite 62% of roofing firms having contractual payment terms of 30 days or less, only 42% were paid within that period, on average. Almost one in five (18%) had payment terms of 46 – 60 days.
Commenting on the research, James Talman, chief executive officer of the NFRC, said: “Our industry is being asked to build more and more but with less cash. 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 sub-contractors across the industry – £300 million is just a snapshot, and this figure is likely to be in the billions of pounds across all the trades.”
He added: “It has been widely acknowledged that cash retentions generally do not provide an appropriate or proportionate way of ensuring quality, but 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quality that doesn’t tie up so much of a sub-contractor’s working capital, yet the industry clings onto this outdated system.
“The government must set the example by removing retentions entirely from all of 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.”
