The latest construction data available in March 2026 shows that activity remained under pressure at the start of the year, even though monthly output edged slightly higher.
Figures released by the Office for National Statistics on 13 March showed that total construction output fell by 2.0% in the three months to January 2026. New work fell by 3.2% over the same period, while repair and maintenance fell by 0.4%. Private new housing was the largest negative contributor, falling by 6.3%.*
Monthly construction output did increase by 0.2% in January, but that improvement came entirely from repair and maintenance, which rose by 3.3%. New work itself fell by 2.0% during the month.*
For contractors, this creates an environment where winning the right work remains important, but so does understanding the contractual security that may be required before a project can proceed.
Performance Bonds Remain a Key Contract Requirement
A Performance Bond is commonly requested where an employer, developer or other beneficiary wants additional financial protection against contractor non-performance.
The bond is usually linked to the underlying contract and may provide a route to financial recovery if the contractor fails to meet its obligations and the conditions of the bond are satisfied.
For contractors tendering for larger or more complex projects, it is therefore important to understand whether a Performance Bond will be required before the contract reaches final execution.
Our Performance Bonds page explains how these bonds work and the types of wording that may be encountered.
Where new work is harder fought, contractors need to consider not only whether they can win the contract, but whether they can satisfy the bond requirements attached to it.
Why Early Bond Planning Matters
A bond requirement that is identified late can create unnecessary pressure around contract signing, mobilisation or payment.
The underwriting process may require financial information, contract details and a copy of the proposed bond wording. If the business is already using a significant amount of its existing surety capacity, the new requirement may also need to be considered alongside its current bonded exposure.
Planning earlier can help identify whether:
- the required bond value is proportionate to the contractor's financial position;
- existing facilities have sufficient available capacity;
- the bond wording is acceptable to the surety;
- additional security or support may be required; and
- alternative markets should be approached.
Our guide to Surety Bond Information Required explains the information that may be needed when a bond is being assessed.
Bond Wording Can Influence Market Appetite
Two bonds with the same financial value can present very different risks depending on how they are drafted.
A conditional bond generally requires specified conditions to be met before a valid claim can be made, while an on-demand bond may create a more immediate payment obligation depending on its wording.
Other provisions such as expiry, assignment, reduction, governing law and the interaction with the underlying contract can also influence how a surety views the requirement.
Our Conditional vs On-Demand Bonds guide explains why wording can be just as important as the bond amount itself.
Larger Contracts Can Change the Underwriting Picture
Where construction markets are more competitive, contractors may seek larger projects or move into new sectors in order to maintain workload.
That can be commercially positive, but a significant increase in contract size may also change the underwriting assessment.
A surety may want to understand whether the business has successfully delivered projects of a similar scale, how the contract will be funded and whether the additional workload creates pressure on cash flow or management resources.
This is one of the reasons that contract growth and bond capacity should be considered together rather than in isolation.
More detail is available in our guide to Contract Growth & Surety Capacity.
When Existing Capacity Is Already Being Used
A contractor with several live bonds may find that the issue is not whether the business is acceptable to the surety, but whether enough unused capacity remains for the next requirement.
Sureties may consider both the single bond amount and the applicant's total aggregate exposure.
Where a business expects repeated bond requirements, a structured surety bond facility can sometimes provide a clearer framework for future capacity, subject to ongoing underwriting and review.
Our Bond Capacity Explained guide also looks at single limits, aggregate limits and available headroom.
A Decline From One Market Is Not Necessarily the End
Some contractors may find that an existing provider is unwilling to support a larger bond, unusual wording or increased overall exposure.
That does not automatically mean the requirement is unplaceable.
Surety markets can have different underwriting appetites, sector preferences and views on bond wording. Understanding why a requirement was declined can therefore be the first step in deciding whether another market may consider it.
Our Declined Surety Bonds page explains some of the reasons applications can be refused and what information may help when looking at alternatives.
Preparing Before the Contract Is Awarded
The most effective time to consider a Performance Bond is often before it becomes an urgent contractual condition.
Contractors expecting to tender for substantial projects should consider the likely bond percentage, proposed wording, required duration and whether the business has sufficient capacity to support the contract.
Where those points are understood early, there is usually more time to address underwriting questions, discuss wording and identify a suitable market.
Source:
* Office for National Statistics, Construction output in Great Britain: January 2026, released 13 March 2026.