Retention

Retention is the percentage withheld from interim payments — typically 3-5% — as security for defects, released in stages at practical completion and the end of the rectification period.

Where it sits: Under current standard forms, 3% is common (JCT allows up to 5% in some forms). The Commercial Payments Bill, if enacted, would abolish cash retentions after a transition period — see our reform coverage.

Retention is the industry\'s oldest and least loved credit instrument. It cascades down the supply chain — main contractor holds from domestic subcontractors as the employer holds from the main contractor — and it is not held in trust: upstream insolvency takes the money with it, which is the whole reform argument in one sentence.

The abolition debate is live and consequential. Alternatives — retention bonds, performance bonds — move the cost from hidden (the subbie\'s working capital) to visible (a premium), and the commercial question is who carries it. We track the Bill\'s progress in our insights.

→ Construction Retentions: Reform on the Horizon