News

As 2024 draws to a close, the latest construction and insolvency figures underline why contractors entering the new year should review not only their pipeline of work, but also the surety capacity available to support it.

Office for National Statistics data released on 13 December showed that monthly construction output fell by 0.4% in October 2024. The fall was driven by a 1.3% reduction in repair and maintenance, while new work increased slightly by 0.2%. Over the three months to October, overall construction output was still 0.4% higher, driven by a 1.7% increase in new work.*

Company insolvency figures released on 17 December showed 1,966 registered company insolvencies in England and Wales during November 2024, 13% higher than October, although 12% lower than November 2023. Insolvency levels remained significantly above those typically seen before the pandemic.**

For contractors preparing tenders and new project pipelines for 2025, these mixed conditions reinforce the importance of understanding how new contracts may affect existing surety exposure, working capital and future bond capacity.

Surety Capacity Is More Than a Single Bond Limit

A contractor may be capable of obtaining one Performance Bond without difficulty, but that does not automatically mean unlimited capacity is available for further requirements.

Sureties commonly assess both the amount of an individual bond and the applicant's total exposure across all outstanding bonds.

This can include:

• Performance Bonds;
• Advance Payment Bonds;
• Retention Bonds;
• Materials Bonds;
• Section, road and sewer bonds; and
• other contractual surety obligations.

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

Existing Bonds Can Continue to Use Capacity

A bond may remain part of the surety's exposure until it has formally expired, reduced or been released.

This means a contractor can complete substantial parts of a project but still have capacity tied up if the corresponding bond remains outstanding.

Where possible, businesses should keep accurate records of:

• current bond values;
• expiry dates;
• contract completion milestones;
• reductions already achieved;
• release documentation; and
• remaining exposure.

Keeping this information up to date can make it easier to understand how much capacity may remain for future requirements.

Growth Can Increase Bond Requirements Faster Than Balance-Sheet Strength

A contractor that wins larger projects or several contracts at once may see its bond requirements increase before the financial benefit of that growth appears in the accounts.

This can create a mismatch between expanding contractual exposure and the balance-sheet strength available to support it.

Sureties may therefore want to understand:

• how the growth is being funded;
• whether working capital remains adequate;
• the level of work in progress;
• the quality of the order book;
• whether margins are being maintained; and
• how the management team will support a larger workload.

Our Contract Growth & Surety Capacity guide explains why rapid expansion can affect future bond availability.

A Facility Can Help With Repeat Requirements

Where a contractor expects recurring bond requirements, a structured surety facility may provide a clearer framework than arranging every bond as an entirely separate transaction.

A surety bond facility may establish agreed parameters for future requirements, such as overall exposure, individual bond limits and the types of bonds that may be considered.

Facilities remain subject to underwriting and ongoing review, but they can provide useful visibility for businesses with predictable or repeat requirements.

Financial Strength Still Underpins Capacity

A bond facility is not simply a fixed credit line that exists independently of the contractor's financial position.

Sureties may periodically request updated financial information and may review capacity if circumstances change materially.

Areas commonly considered include:

• latest filed accounts;
• management accounts;
• net assets;
• liquidity and cash flow;
• work in progress;
• existing bonded exposure; and
• future contract commitments.

Our Surety Underwriting page explains the wider factors that may influence this assessment.

Year-End Planning Can Reduce Urgent Bond Problems

The year-end period is a useful opportunity for contractors to review likely bond requirements before new tenders and contracts begin to accelerate in the new year.

Where requirements are identified early, there is more time to address issues such as:

• insufficient available facility headroom;
• larger-than-usual bond amounts;
• unusual wording;
• out-of-date financial information;
• existing bonds that should already have been released; and
• the need to approach additional surety markets.

For contractors facing genuinely tight deadlines, our Urgent Surety Bond Requirements guide explains what can help reduce avoidable delays.

Capacity Should Be Planned Alongside the Contract Pipeline

The December figures highlight the mixed environment contractors are carrying into 2025: new work was still providing some support to construction output, while insolvency levels remained elevated.

Against that backdrop, bond capacity should be considered as part of wider contract and financial planning.

A business with a strong pipeline may need more surety support as it grows, while a contractor with existing bonds may need to ensure old exposure is formally released before the next requirement arrives.

Understanding that position before an urgent request lands can make the surety process considerably easier to manage.