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Cash retention is widely practised in the construction industry in the UK, although it is not universally used. It is “a sum of money withheld from the payments of a construction sector project in order to mitigate the risk that such projects are not completed… to the required quality standard.”

They are a means of incentivising the contractors to complete the work to a good standard, and to return to rectify issues during a specified time period (the ‘defects liability period’).

The retentions are primarily held by the Tier 1 construction firm (the main contractor). The retention will usually cascade down throughout the supply chain. It is usually written into contracts, and only a small number of clients have waived their right to hold retention funds.

The total sum of held retention is around £3.2 billion to £5.9 billion (2015 prices) for the construction sector in England over the course of a given year.

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