Plain answer
Are construction retentions being banned?
Not yet. The ban is in a Bill, not in law. It sits in the Commercial Payments Bill, which started in the Lords on 19 May 2026, had its second reading on 9 June, cleared committee stage on 21 July, and is down for report stage on 15 September 2026. If it clears the Lords it still has to go through the Commons before it can get Royal Assent. Until it becomes law and is switched on, retention clauses apply as they do today, and the government has said it intends to give firms a lead-in and a transition period before anything changes.
The Bill itself
What does the Bill actually say about retentions?
The Bill's own long title says it is a bill "to ban retention clauses in the construction sector", alongside wider payment reform.
The government's factsheet is more specific. The Bill will improve payment practices by "prohibiting the deduction and withholding of retention payments under the terms of a construction contract. We will consult further on the timing for implementation."
The same Bill carries three other things a construction firm will feel: a maximum payment term of 60 days, "with strictly limited exemptions"; interest on late payments "at 8% above the Bank of England base rate"; and stronger powers for the Small Business Commissioner, including adjudicating payment disputes outside court, making binding interim decisions, and imposing financial penalties on persistent late payers.
Where it has got to
How far through Parliament is it?
| Stage | Date | House |
|---|---|---|
| First reading | 19 May 2026 | Lords |
| Second reading | 9 June 2026 | Lords |
| Committee stage | 21 July 2026 | Lords |
| Report stage | 15 September 2026 | Lords |
| Third reading, all Commons stages, Royal Assent | Not yet scheduled |
The current text is HL Bill 45, as amended in committee, published on 21 July 2026.
Timing
So when would a ban actually start?
Nobody can give you a date, and anyone who does is guessing.
The government has said it will "provide an appropriate lead-in time before the powers come into force, allowing businesses time to prepare", and that this "will include a transition period". It has also said the measures "will not be applied retrospectively", so payments, contracts and disputes will be judged by the rules in place at the time.
In plain terms: the Bill has to finish in the Lords, go through the Commons, get Royal Assent, and then be switched on by the government, with more consultation on the timing for the retentions part specifically. Your current contracts are not affected by a Bill that is not law.
The money
How much is actually tied up in retentions?
The last time the government measured it properly, the answer was billions.
Its impact assessment put the total held in retentions in England at between £3.2 billion and £5.9 billion a year, with a central estimate of £4.5 billion, in 2015 prices. The same document put the money lost by construction contractors each year because another organisation went under at £229 million a year.
The research behind it found that 44 per cent of contractors who had retentions held from them in the previous three years had gone unpaid because of an insolvency further up the chain. To be fair to the numbers, the same research found that happened on only around 1 per cent of their contracts. It is not constant. It is just expensive when it lands.
The same research described how a retention normally works. It is typically 5 per cent of the payment value. Half comes back at completion. The other half comes back after the defects liability period, which is usually 12 months, and 24 months in house building.
Before the law changes
What can a firm do now?
Ordinary, unglamorous things, and they are worth doing whatever Parliament does.
Every live and recently finished job, how much is retained, and who is holding it.
Completion and the end of the defects liability period. Those are the days the money becomes due, and the days nobody remembers.
In writing, on the day. Not a month later, and not in a phone call nobody logged.
What was agreed, when it was asked for, what came back. If it ever goes to a dispute, the record is the case.
The most common reason retention does not come back is that something on the defects list is still open.
Where an agent helps
Can an AI agent help with any of this?
If you are chasing retentions now, the useful part is the admin, not the law.
An agent keeps the dates and sends the request on the day it is due, in your firm's name. It follows up when nothing comes back, so the ask does not depend on somebody remembering while they are on site. When your own subcontractors ring to ask where their retention is, it tells them what your record says and passes anything else to a person. The calls, emails and messages it handles sit on the record, so what was asked and what was promised is not a matter of memory.
Where the limits are
What will it not do?
It will not give legal advice. This page reports the status of a Bill. What your contract means, and what you should do about it, is a question for your own adviser.
It will not decide whether money is due. It asks on the date you set and keeps the record. Entitlement stays with you and your quantity surveyor.
It will not agree terms. Anything that needs judgement, or a relationship, goes to a person with everything already gathered.
Frequently asked
The questions firms ask first.
Is the retentions ban law?
No. It is in the Commercial Payments Bill, which is still in the House of Lords and has not received Royal Assent.
Can I stop having retention held now?
No. Your existing contracts stand. The government has said the measures will not be applied retrospectively.
Does the Bill only cover construction?
No. The retentions ban is construction specific, but the 60 day payment cap, the mandatory interest and the Small Business Commissioner's new powers apply across business to business payment.
What happens to retention already held when the ban starts?
The government has said there will be a lead-in and a transition period, and that it will consult further on the timing for implementation. The detail is not settled.
Where can I follow it?
The Bill's own page on the Parliament site is updated as each stage happens. It is linked in the sources below.
Where the facts come from
Every figure, and the page it came from.
UK Parliament, Commercial Payments Bill [HL], read 7 September 2026
The long title "to ban retention clauses in the construction sector"; the stage dates of 19 May, 9 June, 21 July and 15 September 2026; the current text HL Bill 45 as amended in committee. bills.parliament.uk/bills/4128
Department for Business and Trade, Commercial Payments Bill: overview, 2026
"Prohibiting the deduction and withholding of retention payments under the terms of a construction contract"; the 60 day cap "with strictly limited exemptions"; interest "at 8% above the Bank of England base rate"; the Small Business Commissioner's powers; the lead-in, transition period and non-retrospective commitments. gov.uk/government/publications/commercial-payments-bill-factsheets/commercial-payments-bill-overview
GOV.UK, 19 May 2026
The announcement of the Bill's introduction to Parliament. gov.uk/government/news/largest-crackdown-on-late-payments-in-over-25-years-as-landmark-bill-enters-parliament
BEIS, Retention payments in the construction industry: impact assessment, 2017
£3.2bn to £5.9bn held in retentions in England each year, central estimate £4.5bn, 2015 prices; £229 million a year lost by contractors to the insolvency of another organisation; a typical 5 per cent retention, half released at completion and half after a defects liability period of typically 12 months, 24 months in house building. assets.publishing.service.gov.uk/media/5a82b647e5274a2e8ab58f4b/Retentions_Consultation_Impact_Assessment_FINAL.pdf
BEIS Research Paper 17, Retentions in the Construction Industry, Pye Tait Consulting, 2017
44 per cent of contractors with retentions held from them in the previous three years had experienced non-payment because of an upstream insolvency, occurring on around 1 per cent of their contracts. assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/654399/Retention_Payments_Pye_Tait_report.pdf
This page reports the status of a Bill before Parliament as at 7 September 2026. It is not legal advice. Related reading: what late payment costs a UK construction firm and the extra work that never makes it onto the bill.
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