Main contractor trade credit insurance hits crisis point

Aaron Morby 8 months ago
Share

Jittery insurers are pulling trade credit insurance cover on some of the country’s leading contractors.

The Enquirer has been contacted by several subcontractors and suppliers in recent weeks warning they are unable to obtain cover on some of the industry’s biggest names.

The spectre of further insolvencies following recent main contractor failures is disrupting the normal function of insurance within the sector as subcontractors say they are being forced to turn down work.

The nervous state of the market was highlighted in the Readie Construction chairman’s memo to staff explaining why the group collapsed. He blamed chronic tightening in the performance bond and trade credit insurance markets for tipping it over the edge.

The Construction Leadership Council working with the Builders Merchants Federation is now trying to quantify the scale of the problems and yesterday launched a Trade Credit Insurance Survey to gather information on the current market position of TCI provision.

The move comes as insurers are reported to have pulled out of construction altogether because they fear continuing high business failure rates.

This has prompted calls for the Government to intervene and reintroduce the Trade Credit Reinsurance Scheme applied at the height of the Covid 19 epidemic.

Ben Woodthorpe, partner at business restructuring and advisory specialist ReSolve, said: “Construction companies are facing higher hurdles obtaining trade credit insurance to protect against industry failure.

“Many insurance providers seem to be unwilling to continue exposure to the construction industry by simply withdrawing the availability of cover or impeding its access through excessive information requests and onerous ongoing assessment processes.”

He warned: “There are also signs that surety and performance bond coverage is being affected by demands for greater security, and personal or parent company guarantees.

“Many believe it is time that the Government considered reintroducing the trade credit reinsurance scheme last seen in 2020 to secure ongoing trade in this critical sector.”

One package contractor told the Enquirer: “Nowadays we receive cover pulls quite a lot but the latest was a big shock to us. It certainly wasn’t a firm among those widely rumoured to have problems.”

“The insurer was right on Readie, so who knows?”

He added: “Why clients don’t start using project bank accounts which would protect themselves, I just don’t get. After all if their contractor went bust then they are not exposed as much.”

An M&E specialist said: “Its very jittery out there. We have seen the market harden on trade credit insurance in the last few months. Several insurers have simply pulled out construction.

“It’s not impossible to get cover, because several opportunists have entered the market to fill the gap, but they are really charging for it.”

Latest news

Go-ahead for City of London’s tallest tower

1 Undershaft building will equal the Shard in height
23 hours ago

Construction T Level scrapped due to lack of demand

Courses canned after less than 100 sign-up for latest round
2 days ago

Five firms clinch £300m Greenwich Uni framework deal

McLaren, Wates, Morgan Sindall, Vinci and Willmott Dixon secure places
1 day ago

Hill Group strikes first Build to Rent deal

House builder agrees finance with Lloyds Living to start Stevenage scheme
1 day ago

Construction output hit by fall in repair and maintenance

Industrial and commercial new work grows despite wider fall in activity
1 day ago

Wates transfers pension scheme to “superfund”

Pension management specialist Clara to take charge of £210m fund
1 day ago

Muse hires new development director for North West

Tom Darby joins from developer Bruntwood
1 day ago

Bid rigging probe launched into school repair work

Firms raided this week with focus on roofing contracts
3 days ago

McLaren hires ex-ISG regional boss for north east expansion

Andrew Beaumont becomes MD of new Yorkshire and North East business
2 days ago

Government commits to four new prisons in seven years

£2.3bn pledged for new prison build programme
3 days ago

Road and rail delays hit revenue at Van Elle

Turnover drops 5% as markets remain challenging for piling specialist
2 days ago

Boot reports ‘noticeable improvement’ in planning system

Government planning reforms already unblocking council planning
2 days ago

Go-ahead to revamp former London city hall

Project will straighten the building's leaning profile with terraces to every level
3 days ago

United Living to divert Midlands gas pipeline

600m pipeline diversion clears way for M54 to M6 link road construction
2 days ago

Credit insurance saves Billington from ISG hit

Steel specialist puts on extra shifts at its plants to cope with demand
3 days ago

M&E specialist Dodd doubles profit on retrofit surge

Family-owned Telford specialist delivers record revenue of nearly £250m
3 days ago

Go-ahead for 800-home Croydon dual towers

One Lansdowne Road build to rent scheme to cost £260m to build
3 days ago

Construction inflation set to return raising tender prices

End of 2024 to mark the bottom of present inflationary trough
3 days ago

Start date for vast Balfour and Costain carbon capture power job

£4bn Teesside project to start construction next year creating 3,000 jobs
4 days ago

Plans go in to start revamp of North Finchley town centre

Developer Regal unveils first details of Barnet masterplan
3 days ago

Glencar bags £18m Big Yellow London store

Six-storey stoarage centre to be built at Staples Corner
3 days ago

Plan unveiled for 31-storey London Fenchurch Street tower

Demolition work to start in 2026 for new office tower
4 days ago

Vinci Building buys tower cranes for first time

Contractor invests in two WOLFFKRAN all-electric cranes at £138m Sheffield site
4 days ago

30 local firms land United Utilities £500m framework

Minor works deal win for North West civils and M&E specialists
4 days ago

Restructure pays off as Higgins returns to profit

Housing contractor recovers from £25.9m loss last year
4 days ago

Former Heathrow boss joins Mace in board rejig

Firm completes string NED appointments to expanded group board
5 days ago

Planning officers to get powers to bypass committee stage for housing

Rayner reform plan to cut out local council planning committees
5 days ago

National Insurance hike to delay construction recovery

Arcadis paints varied picture with full recovery delayed until 2026
5 days ago

Gratte Bros rides out cost rises with profit increase

M&E specialist warns of further upward pressure on wage costs
5 days ago

Sellar’s 36-storey London City office tower approved

Demolition work to start in 2026 at 60 Gracechurch Street site
1 week ago

Contractor services