News

The latest figures released in September 2026 underline why contractor financial strength remains an important consideration in surety underwriting.

Office for National Statistics data published on 11 September showed that total construction output fell by 0.5% in the three months to July 2026. Both new work and repair and maintenance declined over the period, by 0.4% and 0.7% respectively.*

The monthly position was slightly more positive, with construction output increasing by 0.1% in July, but new work still fell by 0.4% during the month.*

Separately, Insolvency Service figures released on 18 September showed that construction recorded the highest number of company insolvencies of any industry over the 12 months to August 2026, with 3,866 cases where industry information was available. Construction accounted for 17% of those recorded insolvencies.**

For contractors seeking bonds, this does not mean that difficult financials automatically result in a decline. It does, however, explain why surety providers continue to examine liquidity, balance-sheet strength, workload and trading performance carefully.

Why a Surety May Decline a Bond Application

There is rarely one universal reason why a bond application is declined.

A surety may be uncomfortable with the applicant's financial position, but it may equally be concerned about the contract, wording, amount of the bond or the total exposure already outstanding.

Common issues can include:

• recent or continuing trading losses;
• weak liquidity or working capital;
• negative net assets;
• a bond that is large relative to the business;
• rapid growth in turnover or workload;
• existing surety capacity already being heavily utilised;
• unacceptable or unusually onerous bond wording; or
• limited trading history or a newly formed applicant.

Our Declined Surety Bonds guide explains these issues in more detail.

Different Sureties Can Take Different Views

Surety markets do not all assess risk in exactly the same way.

One provider may be particularly cautious about construction businesses with negative net assets, while another may be prepared to consider the same company where current trading, cash flow or wider group support provides additional comfort.

Likewise, a surety may be comfortable with the applicant but unwilling to accept a particular form of bond wording.

The reason for the original decline is therefore important when deciding whether an alternative market may be appropriate.

A Loss-Making Company Is Not Automatically Unbondable

Construction businesses can report losses for many different reasons.

The underwriter may want to understand whether a loss arose from one exceptional contract, restructuring costs, delayed projects or a broader deterioration in the underlying business.

Current trading can also be relevant. A company whose statutory accounts show a historic loss may now be performing considerably better than those accounts suggest.

Management accounts and an explanation of the circumstances can therefore help the surety understand what has happened since the last filed financial statements.

Our Loss-Making Companies & Surety Bonds guide looks specifically at this type of application.

Negative Net Assets Need Context

Negative net assets can also restrict access to some traditional surety markets, but the headline figure alone may not provide the full picture.

An underwriter may consider:

• current liquidity;
• recent management accounts;
• intercompany balances;
• shareholder funding;
• parent-company or group support;
• the underlying profitability of current work; and
• the size of the proposed bond relative to the business.

Our Negative Net Assets & Surety Bonds page explains how these cases may still be considered depending on the circumstances.

Bond Wording Can Cause a Decline Too

Not every declined bond is primarily a financial issue.

The wording itself can materially alter the risk presented to the surety.

An on-demand obligation may be viewed differently from a conditional bond, while provisions relating to expiry, assignment, claim triggers or amendment of the underlying contract can also influence appetite.

A contractor with otherwise acceptable financials may therefore find that a provider declines the proposed wording rather than the company itself.

Our Conditional vs On-Demand Bonds guide explains why the structure of the obligation matters.

Existing Bond Exposure Can Restrict a New Application

A contractor may also be financially sound but already have a substantial amount of surety exposure outstanding.

Existing Performance Bonds, Retention Bonds, Advance Payment Bonds and other obligations may all count towards the applicant's aggregate capacity.

If too much of an existing facility is already being used, the issue may be available headroom rather than the creditworthiness of the contractor.

Our Bond Capacity Explained guide covers single bond limits, aggregate exposure and remaining capacity.

Additional Support May Change the Underwriting Position

Where the applicant does not provide sufficient standalone strength, some markets may consider whether additional support is available.

Depending on the circumstances, this can include:

• a parent-company indemnity;
• wider group support;
• shareholder support;
• additional financial information; or
• other security arrangements requested by the surety.

These requirements vary between providers and are not automatically necessary in every case.

Our Bond Security & Surety Indemnities guide explains the different forms of support that may be encountered.

Presenting the Case Properly Matters

Where a contractor has already received a decline, repeatedly submitting the same information to different markets without understanding the problem may not improve the outcome.

It is usually more useful to identify why the original provider declined the requirement and then determine what additional information or alternative structure could address that concern.

This might mean supplying up-to-date management information, explaining an exceptional loss, demonstrating group support or discussing whether different bond wording could be accepted.

Our Surety Bond Information Required guide sets out the information that may help an underwriter reach a properly informed decision.

Difficult Does Not Mean Impossible

The insolvency figures published in September reinforce the financial challenges that continue to affect the construction sector.

Those conditions naturally influence underwriting, but surety decisions remain case-specific.

A contractor with an imperfect balance sheet may still have strong management, profitable current contracts, good liquidity or support from a wider group. Equally, a financially stronger business may encounter difficulty if the proposed obligation is disproportionately large or the bond wording falls outside the surety's appetite.

Where a bond has been declined, the most useful next step is therefore to understand the reason and assess whether another structure or market may be appropriate.