In the UK construction industry, retention payments are one of the biggest silent killers of profit and cashflow. What surprises us at Thomas Emlyn Ltd is how few construction firms properly track the retentions they’re owed — and even fewer track the retentions they owe out. That combination is dangerous.
Because when you’re not tracking it… and your customer definitely isn’t tracking it… what happens when your retention becomes due?
Nothing.
Silence.
You’ll be waiting forever.
This guide breaks down how to finally take control of your retention money — with a simple, proactive system that improves cashflow and strengthens margins.
What Is Retention in Construction? (And Why Do So Many Firms Lose It?)
Retention is a percentage (typically 3–5%) of your invoiced value withheld by the main contractor or client as security.
Half is usually payable at practical completion and the rest at the end of the defects period.
But here’s the uncomfortable truth:
Most retention losses don’t happen because of disputes.
They happen because nobody remembers.
Projects finish.
People move on.
QSs change companies.
Email addresses stop working.
And the retention quietly disappears into the abyss.
The real reasons retentions go missing include:
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No central record of retention amounts
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No due-date reminders
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Claims sent to abandoned inboxes
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Poor handover when staff leave
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No evidence trail of completed works
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The contractor simply… forgetting
For many firms we work with, retentions only surface when cashflow gets tight — often years after they were first earned.
How to Track Construction Retentions Properly (Simple System, Big Impact)
Short answer:
Create a single retention log that tracks every pound owed, every pound you owe out, and every important date. Then build automated reminders for 12, 6, 3 and 1 month before release.
Now the full detail — and why it matters.
🧾 What your retention log must include:
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Project name & client
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Retention amount
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Percentage applied
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Practical completion date
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Defects end date
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Retention release value (first half / final half)
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Notes on risk or disputes
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Contact details for the person responsible
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Backup contact if they leave
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Credit risk of the company holding your money
This is exactly the kind of system we build inside our Virtual Finance Office for clients — because once it’s centralised, everything becomes easier.
Why Do You Need Retention Reminders 12, 6, 3, and 1 Month Before?
Short answer:
To make it impossible for the contractor to “forget” — without you becoming a nuisance.
Longer explanation:
A 12–24 month defects period means you’re chasing money for work you completed years ago. If you wait until the due date to make contact, you’re already late.
A professional, proactive cadence looks like this:
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12 months before:
“Just confirming retention due in a year. Let me know if any documentation is required.” -
6 months before:
“Checking in early — can you confirm who will process the release?” -
3 months before:
“Please confirm the inspection process and any snags outstanding.” -
1 month before:
“All documentation attached; please confirm planned payment date.”
This drip-feed communication is polite, organised, and professional — and it dramatically increases the probability you’ll actually be paid.
One London-based subcontractor we supported recovered £118,000 of forgotten retentions within 90 days simply by implementing this reminder system.
How Poor Retention Tracking Destroys Profit Margins
Short answer:
Lost retentions are lost profit — not “future income”.
In detail:
If you’ve earned the money but don’t collect it, it’s a straight hit to net profit. For example:
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Project value: £400,000
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Retention at 5%: £20,000
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Gross profit margin: 18% (£72,000)
If you lose the retention, your margin effectively drops to 13%.
That’s the difference between predictable growth and permanent financial struggle.
Multiply this across dozens of projects and you can easily have £150k–£500k missing in action.
We’ve seen this repeatedly in UK firms turning over £2m–£10m.
What About the Retentions You Owe Out? Why Do They Matter?
Short answer:
You can’t manage cashflow properly unless you know what’s coming in and what’s going out.
In detail:
When you owe retentions to subcontractors, you carry future liabilities.
If you don’t track them:
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You can’t forecast future cashflow dips
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You can’t plan for end-of-year tax or dividends
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You risk disputes if subcontractors chase bills you’ve not prepared for
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You may accidentally underpay a subcontractor (creating legal risk)
Tracking what you owe is just as important as tracking what you’re owed.
How to Protect Your Retentions When People Move On
Short answer:
Always have a second point of contact and always send claims to a monitored accounts mailbox.
Longer version:
One of the biggest reasons retention claims fail is simple human change:
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The QS moves to Dubai
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The project manager leaves
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The email address gets shut down
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The admin team reorganises
You should track:
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Primary contact
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Secondary contact
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Company’s accounts email
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Evidence of practical completion
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Snagging reports
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Warranty documentation
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Email proof of previous conversations
If your retention claim gets lost in an abandoned inbox, it can take months to restart the process with a new QS.
This is why Thomas Emlyn Ltd builds a retention communication file for clients so there’s a clean record ready to hand over — even years later.
How Can a Virtual Finance Office Help You Recover More Retentions?
Short answer:
Because it gives you a specialist team tracking every deadline, every project, and every penny — every week.
Here’s what our Virtual Finance Office includes:
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Full retention tracking (owed and owing)
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Automated reminders
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Contact verification
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Monthly reporting
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Cashflow forecasting
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Margin protection
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Dispute risk monitoring
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Credit health checks on main contractors
One client told us:
“It’s the first time I’ve actually known exactly what retentions we’re owed. It feels like finding money.”
They recovered just over £160,000 in the first six months.
How to Implement a Retention System in Your Business (Step-by-Step)
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Centralise all retention data
Use a shared spreadsheet, CRM, or finance system. -
Add core dates
Practical completion, defects end, release dates. -
Set automated reminders
12, 6, 3, 1 month reminders. -
Store all documentation in one place
Certificates, snagging lists, emails. -
Nominate a single internal owner
Someone responsible for chasing and keeping the log updated. -
Review the log monthly
Not once a year. Every month. -
Assess credit risk
If the main contractor enters financial difficulty, you may need to accelerate claims. -
Use professional support
A Virtual Finance Office ensures nothing slips through the cracks.
FAQs: Retentions in UK Construction
1. How much retention is standard in UK construction?
Most UK contracts hold back 3–5%, split into two stages: half at practical completion and half at the end of the defects period. But NEC contracts, JCT contracts, and specific framework agreements may differ. Always check the contract — and don’t assume a standard percentage.
2. What happens if the contractor refuses to release my retention?
Start by reviewing the contract terms and ensuring all documentation has been submitted correctly. Gather evidence of completion and communicate professionally. If delays continue, you may need to escalate through a QS, dispute resolution, or adjudication. We often support clients by preparing the documentation and financial audit trail to strengthen their claim.
3. Should subcontractors track retentions even if they’re small?
Yes. Retentions add up quickly over multiple projects. £4,000 here, £7,500 there — over a year this can easily reach £50k–£150k. Even small retentions have a major impact on your bottom line when multiplied.
4. How do retentions affect cashflow and profitability?
Retention money is cash you’ve already earned but don’t yet have. Poor tracking means unpredictable cashflow, weaker margins, and difficulty planning growth. Strong tracking means more predictable forecasting and healthier financial resilience.
5. Can Thomas Emlyn Ltd manage retention tracking for my business?
Yes — it’s one of the core services within our Virtual Finance Office and Virtual Finance Director solutions. We handle the admin, reminders, documentation, and follow-up so your retentions are treated as real money — not “nice to have if it ever arrives”.
Thomas Emlyn Ltd
Stronger Margins – Healthier Cashflow – Sustainable Growth
