Hiring contractors for building projects — whether it’s a new extension, a bathroom refit, or rewiring an entire property — is often one of the biggest financial commitments a homeowner or business will make. The stakes are high. You’re investing thousands (sometimes tens of thousands) into a project that unfolds over weeks or months. And while most tradespeople are honest and hardworking, the reality is that money disputes are one of the most common issues in the construction industry.

As a client, you want to make sure your money is safe. You don’t want to hand over a huge deposit only to be left with half-finished work. At the same time, it’s not fair to expect contractors to carry all the risk by funding materials, paying staff, and running the site out of their own pocket. This is where many projects go wrong: both sides are nervous about money, but without structure, they rely on blind trust.

The solution? Escrow services. Escrow creates a middle ground where both client and contractor are protected. In the UK, services like the Construction Payment Scheme are designed to give both sides confidence that money is secure, payments are fair, and projects stay on track.

The Problem: Why Money Disputes Happen in Construction

Construction projects are complex, cash-heavy, and often unpredictable. Unlike buying a sofa or a TV, you don’t pay once and take the item home. Instead, you’re paying for a mix of labour, materials, and time, spread out across weeks or months.

That creates tension:

• Clients worry about overpaying upfront. What if the work isn’t completed, or standards aren’t met?
• Contractors worry about not being paid at all. What if the client delays, disputes, or disappears after work is delivered?

Both concerns are valid, and both have horror stories attached:

• A family pays 70% upfront for a driveway installation, only for the contractor to abandon the job after a week.
• A builder completes a full kitchen fit-out, but the client delays the final payment for three months, citing “small snags.”

Comparison: It’s like playing tug-of-war with money as the rope. The client pulls one way, the contractor the other. Escrow doesn’t cut the rope — it holds it firmly in the middle until both sides agree to release it.

What Is Escrow, and How Does It Work?

Escrow is a simple but powerful concept. Instead of the client paying money directly to the contractor, the funds are deposited into a secure third-party account. The money stays there until both sides agree that certain conditions — usually stages of work — have been met. At that point, the funds are released.

This creates fairness:

• Clients know their money is safe. It won’t disappear into a contractor’s pocket before work is delivered.
• Contractors know the money exists. They won’t spend weeks on site only to chase invoices that may never be paid.

In the UK, the Construction Payment Scheme offers an escrow-based system tailored for building and trades projects. Instead of relying on “trust me” agreements, it ensures that funds are secured from the start, then released fairly as work is completed.

Why Clients Should Protect Their Money With Escrow

For clients, escrow provides peace of mind. You’re no longer gambling with your savings or business budget.

• Funds are secure: You only release money when you’re satisfied the agreed stage is complete.
• No more disappearing contractors: Rogue traders can’t demand deposits and vanish.
• Disputes are fairer: If standards aren’t met, the money doesn’t move until the issue is resolved.

Example: A homeowner hires a roofer for £15,000. Without escrow, the roofer asks for £7,500 upfront. The homeowner pays, but the roofer only completes half the job before vanishing. With escrow, the same £7,500 is deposited securely. Once the roof is watertight and signed off, the payment is released. The homeowner never risks paying for unfinished work.

Comparison: Using escrow is like locking your money in a safe until the job is done — the contractor knows the money is there, but they can’t take it until they’ve held up their end of the deal.

Why Escrow Benefits Contractors Too

It’s not just clients who win with escrow. Contractors benefit just as much because they no longer have to worry about whether a client will pay once the work is done.

• Guaranteed funds: Contractors know the client has already set aside the money.
• Reliable cash flow: Milestone releases give contractors steady payments to cover wages, suppliers, and overheads.
• Less chasing: No more endless phone calls or emails to get invoices paid.

Example: A plasterer takes on a £12,000 job. Without escrow, he completes the first phase and waits 30 days for an invoice to be processed. With escrow, £4,000 is released instantly upon completion of phase one, giving him the cash flow to pay his team without stress.

Comparison: For contractors, escrow is like working with a client who always has the money ready in an envelope — you just collect it at each milestone. No delays, no excuses.

How to Use Escrow Efficiently in a Project

To get the most out of escrow, payments should be structured in clear milestones. This ensures fairness for both sides.

Example payment plan for a £40,000 extension:

• £10,000 released after groundwork and foundations.
• £10,000 released once the structure is watertight.
• £10,000 released after electrics and plumbing (first fix).
• £10,000 released on completion and snagging sign-off.

This way:

• The client only pays once they see progress.
• The contractor has steady cash flow to keep the job moving.
• Both sides know exactly when payments will be released — no surprises.

Comparison: It’s like paying for a holiday in instalments. You pay a deposit to secure the booking, another chunk as you approach the date, and the balance when you arrive. Escrow follows the same logic, but for construction work.

Why Escrow Is the Future of Paying Contractors

In 2025, construction and trades are under more pressure than ever. Material prices are volatile, clients are cautious with money, and disputes are common. Escrow services meet both sides in the middle:

• For clients: It protects savings and ensures you only pay for work that’s delivered.
• For contractors: It guarantees funds are set aside before they pick up a tool.
• For both sides: It builds trust and creates efficiency by removing the biggest barrier — money worries.

As services like the Construction Payment Scheme become more widely used, escrow is quickly becoming the professional standard for how building work should be paid.

Conclusion

Protecting your money when working with contractors isn’t about mistrust — it’s about being smart. Escrow services like the Construction Payment Scheme provide a balanced, fair solution that safeguards clients from rogue traders while giving contractors the security they need to do their best work.

Instead of endless chasing, nervous deposits, or payment stand-offs, escrow locks in clarity and fairness from day one. Clients see progress before releasing money, and contractors know the funds are guaranteed. Both sides win.

In short: if you’re planning building or trade work in 2025, don’t rely on handshake deals or blind trust. Protect your money, ensure a fair service, and make escrow the foundation of your next project.