News

As 2025 draws to a close, the UK construction market continues to present a mixed picture for contractors and developers. While there remains a substantial pipeline of work across the sector, the latest construction figures underline why businesses entering 2026 should pay close attention not only to turnover and new contracts, but also to cash flow, workload and available surety capacity.

Figures released by the Office for National Statistics in December showed that total construction output fell by 0.3% in the three months to October 2025. New work increased slightly by 0.1%, while repair and maintenance fell by 1.0%. Monthly construction output was also estimated to have fallen by 0.6% during October.*

At the same time, company insolvency figures released during December continued to demonstrate the financial pressures affecting UK businesses. The Insolvency Service recorded 1,866 registered company insolvencies in England and Wales during November 2025. This was 8% lower than October and 7% lower than November 2024, although monthly insolvency numbers during 2025 had generally remained slightly above 2024 levels.*

Why Market Conditions Matter to Surety Underwriters

A softer construction market does not mean that contractors cannot obtain bonds. It can, however, increase the importance of presenting a clear financial and commercial picture to the surety market.

When assessing an application, sureties will typically consider far more than the value of one individual contract. Current financial performance, liquidity, existing workload, outstanding bonded obligations and the contractor's ability to deliver its wider order book can all form part of the underwriting assessment.

Our guide to surety underwriting explains the principal areas that may be considered when a surety reviews a business.

Growth Can Create Its Own Surety Challenges

Winning new work is positive, but rapid contract growth can sometimes create pressure on working capital and surety capacity before the financial benefit of that growth is fully reflected in the accounts.

A contractor moving into larger projects, taking on several contracts simultaneously or increasing turnover quickly may therefore find that underwriters want to understand how the growth is being funded and managed.

This is particularly relevant where existing bonds remain outstanding. Sureties may consider both the proposed new requirement and the applicant's aggregate exposure across all live bonds.

Businesses expecting significant growth in 2026 may therefore benefit from reviewing their contract growth and surety capacity before an urgent bond requirement arises.

Available Bond Capacity Is Not the Same as Turnover

There is no single universal formula that determines how much bond capacity a contractor can obtain. Appetite varies between sureties and depends on the circumstances of the individual business.

Factors may include:

• current and historic financial performance;
• net assets and liquidity;
• existing bonded exposure;
• the size and duration of the proposed contract;
• work in progress and the wider order book;
• bond wording and claim structure; and
• the experience and track record of the contractor.

Our Bond Capacity Explained guide looks in more detail at single bond limits, aggregate exposure and available headroom.

Planning Ahead for Performance Bond Requirements

Performance Bonds remain one of the most common forms of contract security requested from contractors. Where a business expects to tender for larger projects during 2026, understanding the likely bond requirement at an early stage can make the placement process significantly easier.

This is particularly useful where the proposed wording is unusual, the bond is required urgently or the contractor is already using a substantial proportion of its existing surety facility.

More information on the product itself is available on our Performance Bonds page.

Preparing for 2026

The end of the year is a useful point for contractors to review their likely bond requirements for the months ahead. Businesses expecting new tenders, larger contracts or multiple concurrent projects should consider whether their current surety arrangements provide sufficient capacity for that anticipated workload.

Where requirements are recurring, a structured surety bond facility may also provide a more efficient way of managing future bond needs than approaching each requirement independently.

Market conditions will continue to change, but good preparation remains one of the most useful ways to reduce unnecessary delays when a bond is required.