News

The latest construction figures released in May 2026 point to a more complicated picture for developers and contractors. While total construction output increased by 0.4% in the first quarter of the year, total new orders fell sharply by 10.5% compared with the previous quarter.*

The decline in new orders was driven mainly by private commercial and infrastructure work, while new work output itself fell by 1.9% during Quarter 1. Monthly construction output did rise by 1.5% in March, helped by increases in both new work and repair and maintenance.*

For developers, housebuilders and contractors working on roads, sewers and wider infrastructure, this is a reminder that project pipelines can change quickly. Where development obligations require bonds under highways or sewer agreements, arranging the required security early can help avoid unnecessary delays later in the programme.

Section Bonds Sit Behind Important Development Obligations

Section Bonds are commonly required where a developer or contractor enters into an agreement with a highway authority, water company or other relevant body to complete infrastructure works.

Depending on the project, this can include:

• Section 38 road adoption agreements;
• Section 278 highway works;
• Section 104 sewer adoption agreements;
• other road and sewer obligations; and
• bespoke infrastructure or development agreements.

The bond provides financial security to the beneficiary while the relevant works remain outstanding.

More information is available on our Section Bonds page.

Bond Requirements Can Arise Before the Main Build Is Complete

Infrastructure obligations often need to be addressed early in a development programme.

A project may require roads, drainage, sewer works, highway alterations or other infrastructure before homes or commercial units can be fully occupied or adopted.

This means the bond requirement can arise while significant capital is still tied up elsewhere in the development.

Where several developments are running concurrently, the amount of surety capacity required can therefore build quickly.

Section 38, Section 278 and Section 104 Bonds Serve Different Purposes

Although they are frequently grouped together as road and sewer bonds, the underlying obligations are different.

A Section 38 agreement typically relates to new roads that are intended to be adopted by the highway authority once the works have been completed to the required standard.

A Section 278 agreement generally covers works to an existing public highway, such as junction improvements, access works or other alterations associated with a development.

A Section 104 agreement is commonly associated with the adoption of newly constructed sewers by the relevant water company.

The bond wording, amount, beneficiary and release process will therefore depend on the particular agreement.

Bond Values Can Change as Works Progress

Section Bond exposure does not necessarily remain fixed for the entire life of the development.

Depending on the agreement, the bond amount may reduce as infrastructure works are completed, inspected or reach specified stages.

Eventually, once the relevant authority is satisfied and the contractual conditions have been met, the bond can be released.

From a surety-capacity perspective, obtaining formal reductions and releases can be important because an outstanding bond may continue to count towards the applicant's overall exposure until the surety is formally released.

Multiple Developments Can Create Capacity Pressure

For housebuilders and developers with several active sites, Section Bonds can represent a significant aggregate exposure.

A business may have one bond for a road agreement, another for sewer works and further bonds across several other developments.

Even where each individual requirement is manageable, the total exposure can influence the amount of additional capacity available.

Our guide to Bond Capacity Explained looks at the difference between individual bond limits, aggregate exposure and available headroom.

Planning a Facility Can Help With Repeat Requirements

Where a developer expects Section Bond requirements across multiple projects, it may be more efficient to discuss the anticipated pipeline with the surety market rather than treating every application as an isolated transaction.

A structured surety bond facility can potentially provide an agreed framework within which future requirements are considered, although individual bonds and overall capacity remain subject to underwriting and the terms of the facility.

Forecasting likely requirements can help the surety understand the developer's expected exposure and may make it easier to identify future capacity needs before they become urgent.

Financial Strength Still Matters

Section Bonds are not assessed solely by reference to the value of the infrastructure works.

The surety may also consider the financial position of the developer or contractor, existing development commitments, available liquidity, group structure and the wider pipeline of projects.

New companies and special purpose vehicles can require additional consideration because the applicant itself may have limited trading history or assets.

In those circumstances, parent-company support, wider group strength or other security may potentially form part of the underwriting structure.

Our guide to Surety Bonds for New Companies & SPVs explains how these structures may be assessed.

Getting the Agreement and Bond Wording Early Helps

One of the simplest ways to reduce delay is to provide the proposed agreement and bond wording as early as possible.

The surety will typically want to understand:

• the beneficiary;
• the amount of the bond;
• the infrastructure works being secured;
• how and when the bond may reduce;
• the release mechanism;
• the applicant's existing bonded exposure; and
• the financial strength supporting the obligation.

Our Surety Bond Information Required guide sets out the broader information that may be requested during an application.

Development Pipelines Need Surety Planning Too

The sharp fall in construction new orders reported in May underlines how quickly development pipelines can change.

For businesses managing several sites, maintaining visibility over outstanding bonds, expected releases and future requirements can be just as important as arranging the next individual bond.

Early planning gives developers more time to understand potential capacity constraints and address underwriting issues before an infrastructure agreement becomes critical to project progress.