CFA Responds to Landmark Government Consultation on Payments and Retention

By Richard Catt, CFA CEO

This summer saw what many are calling the biggest opportunity for change in decades when it comes to improving payment practices and tackling retentions in construction. The government’s payment and retention consultation, which ran through the summer and closed on 23rd October 2025, set out a series of proposals aimed at fixing the long-standing issues of late payments and withheld retentions.

At the CFA, we took this consultation very seriously. Late payments and retentions are two of the most common and frustrating issues our members raise with us, so we worked hard to make sure your voices were heard loud and clear.

Our response wasn’t written in isolation. We discussed the proposals internally and with the CFA Council, spoke directly with individual members, and ran a short online survey to gather views across the industry. Members were encouraged to send in their own responses too, to help show government the scale of feeling on the ground.

We also teamed up with Build UK, attending consultation meetings they organised and helping shape a unified message across the specialist contractor community. As one senior civil servant, Fergus Harradence, put it this was a ‘once-in-a-generation chance’ to fix something that’s been broken for far too long.

To back up our response with real data, we looked at figures from our 2025 CFA annual return. Among 280 contractor members, we found:

• £24.3 million in outstanding invoices more than 30 days overdue
• £16.2 million in overdue retention payments

Those are eye-watering numbers, and they underline the extent of the problem. For many small-to-medium enterprises (SMEs), that’s money already earned but still sitting in someone else’s bank account. It’s not hard to see why this issue has become such a priority.

Our position throughout the consultation was clear and simple:

1. Pay us in 30 days – not 60 or 45

Government suggested a 60-day maximum payment term, but we made it clear that’s still too long. Subcontractors have to pay their own suppliers and staff in 30 days (or less), so it’s only fair that they’re paid in the same timeframe. Anything longer just shifts risk and cashflow pain down the supply chain. On this we were slightly at odds with Build UK and their unified position that includes the voice of main contractors of course.

2. Time to scrap retentions

We’ve said it before, and we’ll keep saying it: retentions are outdated. They often aren’t returned, they make no difference to whether a contractor returns to fix an issue, and they leave SMEs carrying all the risk. We called for the complete abolition of retentions, and if that can’t happen immediately, then at the very least, retention funds should be protected in segregated accounts, so they can’t vanish as additional profit or working capital for a main contractor. Otherwise, they should only ever be available should a floor fail, or the specialist ceases trading. 

3. Less red tape, more enforcement

Everyone knows what good payment behaviour looks like. What’s missing are consequences when companies don’t follow the rules. We said the focus should be on penalties and enforcement, not more box-ticking or reporting requirements that add bureaucracy without changing behaviour.

4. Think specialist, not just main contractor

We reminded policymakers that reforms must work for specialist contractors, not just the big players at the top of the chain. For too long, SMEs have carried disproportionate financial risk while having the least control over payment terms.

Across the consultation’s proposed measures we were broadly supportive, so long as they deliver real, practical change. We backed:

• Automatic statutory interest on late payments, removing the burden from SMEs to ‘ask’ for it.
• A 30-day deadline for invoice disputes, to stop companies using ‘disputes’ as a delaying tactic. 
• Penalties for spurious complaints relating to work successfully completed.
• Financial penalties for persistent late payers, linked directly to unpaid interest.
• Transparency around how much interest is owed and paid, to highlight poor payment behaviour.

We also made the point that any new powers for the Small Business Commissioner must extend to construction, otherwise one of the worst-affected sectors will be left out of the solution.

Pulling together this response was a real team effort within CFA, across our Council, and in partnership with members and Build UK. Our goal was to make sure the flooring industry’s perspective was front and centre.

As one member summed it up during our research: ‘We’re not asking for special treatment, just to be paid fairly and on time for the work we’ve already done.’ It’s a simple message, but it cuts to the heart of the issue.

Now that the consultation has closed, government will review all submissions before publishing its conclusions and next steps. The CFA will stay closely involved in those discussions, pressing for measures that actually improve cashflow and fairness across the supply chain. We’ll continue to argue that fair payment means 30 days, no retentions, and real penalties for those who don’t play by the rules.

Whatever happens next, members can be confident that CFA has been fighting their corner throughout this process and will keep doing so until meaningful change is delivered.

For more information on CFA membership, and how we support our members through government consultation, and within the wider construction industry, email info@cfa.org.uk, call 0115 941 1126, or visit www.cfa.org.uk.