The UK Commercial Payments Bill passed the House of Lords on 20 October 2026 with its construction cash-retention ban intact. What changed and what's next.
Education only / verify at source / not legal advice. This is a news summary of a UK Bill that is still before Parliament. It is not law, and its text and timing can change in the House of Commons. Confirm the Bill page, the current print and Hansard, and speak with UK counsel before relying on anything here.
The Commercial Payments Bill [HL] completed its House of Lords stages on 20 October 2026. Hansard for that day records three short lines: "A privilege amendment was made." "Bill read a third time." "Bill passed and sent to the Commons." No substantive amendment was moved at Third Reading, so the construction retention clauses travel to the Commons in the form the Lords agreed at Report stage on 15 September 2026.
The Bill is not law yet. It had its Commons First Reading on 21 October 2026, printed as Bill 166, and Commons Second Reading had not been scheduled as of October 28, 2026. It still needs to pass every remaining Commons stage and receive Royal Assent, and even then its retention ban would start only on a day set later by regulations. Readers who want the full mechanics can read our primer on how the retention ban and bond alternatives work, refreshed for this stage.
The version sent to the Commons is HL Bill 55 (as amended on Report). The measures that matter most to construction and surety readers are:
| Measure | What HL Bill 55 says |
|---|---|
| Payment terms | Maximum 30 days where the purchaser is a public authority; 60 days otherwise (new s.2B(2)) |
| Power to shorten | Regulations may lower both limits later, with consultation within five years (new s.2F) |
| Construction retention clauses | Made ineffective, then banned as void (clauses 13–14) |
| Unauthorised retention | Fixed sum of the higher of £40 or 50% of the retention debt (clause 16) |
| Start date | Set by regulations; not yet set (clause 32) |
The payment-terms caps are written into the Bill itself. At Report stage the Government added the power to shorten them, and Lord Leong told peers that "the Government will not use this power to reduce maximum payment terms for at least five years." If enacted as drafted, clause 33 says it "may be cited as the Commercial Payments Act 2026."
For surety readers, the important passage is the minister's Report-stage statement on what replaces cash retention. Lord Leong said construction "should move away from cash retentions and towards modern, more secure and equitable forms of surety," naming "performance and retention bonds, already available in the UK" and "warranty bonds, which are very common in Europe and are available in the UK." He added: "We will be working with surety providers to ensure that a range of alternatives is available when the ban comes into force."
That puts three familiar instruments in front of UK employers and their advisers: the performance bond used across contract surety, the retention bond, and warranty bonds, which the minister described as common in Europe. The minister also drew two limits. Payment through a bank or escrow provider remains permitted, but a third party holding money back as security for the supplier's performance could itself amount to a retention. Genuine staged payments remain permissible, while withholding that is simply relabelled can still be a retention.
None of this settles which bond wordings an employer will accept, or how the Bill's "related agreement" drafting treats a retention bond. Those remain contracting and underwriting questions.
Still open: the resident management company exemption. At Report, an amendment to exempt resident-run or resident-owned blocks was debated and not pressed; the minister opposed it, saying that agreeing to it "would create a broad exemption for construction contracts entered into by resident management and right-to-manage companies." The Finishes and Interiors Sector (FIS) says it is likely to be tabled again in the Commons.
Still open: legislative consent. At Third Reading, Lord Leong said the Bill "affects the whole of the United Kingdom" and that the Government is "hopeful of securing legislative consent from Scotland, Wales and Northern Ireland," adding that "it is not unusual for issues related to legislative consent to be resolved in the second House."
Still open: commencement. The Government has said it will consult further on implementation timing, and no commencement regulations have been made. Any Commons amendments would return to the Lords for consideration before Royal Assent.
UK cash retention is not the same as US retainage or Canadian holdback, and the Bill's clauses do not map onto either. In the US, Colorado's HB26-1311 now lets contractors on private projects tender a bond in lieu of cash retainage; our guide to US retainage bonds explains how that works.
