The Specialist Engineering Contractors’ Group – a representative body for construction businesses, has said that local authorities are funding activities with funds owed to suppliers.
Responses to freedom of information requests issued by the group found that more than 75 per cent of England’s 353 local authorities said they had deducted five per cent or more of funds owed to suppliers as security in case of subcontractors failing to repair any defects.
However, there are widespread concerns in the sector that firms are having to wait many months to receive the outstanding amounts and some are even having to write off the funds and accept discounts.
Councils are thought to not be ring-fencing the cash involved, with six per cent saying that the funds are invested in overnight money markets.
Just 20 per cent of councils responding said they did not deduct cash.
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