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.”
