News

The first construction figures released in 2025 showed modest growth in activity at the end of the previous year, giving contractors a relatively positive starting point as new tenders and project opportunities moved into focus.

Office for National Statistics data published on 16 January showed that construction output increased by 0.4% in November 2024. Both new work and repair and maintenance contributed to the monthly increase, rising by 0.3% and 0.5% respectively. Over the three months to November, total output increased by 0.2%, driven by a 0.4% increase in new work.*

The Insolvency Service also published its annual summary for 2024 during January. It recorded 23,872 registered company insolvencies in England and Wales during the year, 5% fewer than in 2023, although compulsory liquidations rose by 14% and reached their highest annual level since 2014.**

For contractors entering a new tender cycle, the figures reinforce the need to balance opportunities for growth with the financial and surety requirements attached to larger or more complex contracts.

Performance Bond Requirements Often Appear Early in the Tender Process

Performance Bonds are frequently included within tender documents or contract conditions where an employer wants additional financial security behind the contractor's obligations.

A contractor may therefore need to establish at an early stage whether the proposed requirement can be supported by the surety market.

This is particularly important where:

• the contract is significantly larger than previous work;
• the required bond value is substantial;
• the wording is unusual or on-demand;
• the contractor already has several live bonds; or
• the employer requires the bond immediately after contract award.

Our Performance Bonds page explains how these bonds work and the factors that can influence placement.

Winning a Contract Is Only Part of the Assessment

A new contract may represent attractive revenue for the business, but the surety will still consider whether the contractor has the financial and operational strength to deliver it.

The underwriting assessment can include:

• current financial performance;
• working capital and liquidity;
• net assets;
• existing debt and financial commitments;
• work in progress;
• management experience;
• the existing order book; and
• current bonded exposure.

Our Surety Underwriting guide explains how these areas may be considered.

Larger Contracts Can Alter the Risk Profile

A contractor that has successfully delivered £1 million projects may not automatically be viewed in the same way when taking on a contract several times that size.

The surety may want to understand whether the business has the management capacity, working capital and sector experience to support the larger obligation.

The financial effect of mobilisation may also matter. Larger contracts can require greater upfront expenditure on labour, materials, subcontractors and plant before corresponding cash is received.

Our Contract Growth & Surety Capacity guide looks at how increasing contract size can influence future surety support.

Bond Wording Should Be Reviewed, Not Just the Value

The amount of the bond is only one part of the risk.

The precise wording can influence when a claim may be made, how long the obligation remains in force and whether the surety is comfortable supporting it.

A conditional Performance Bond may require specified contractual conditions to be satisfied before liability arises, while an on-demand obligation may operate very differently depending on the drafting.

Other provisions around expiry, assignment, variations to the contract and the beneficiary's rights can also affect market appetite.

Our Conditional vs On-Demand Bonds guide explains these differences in more detail.

Existing Bonds Can Limit Headroom for the Next Tender

A contractor may have a strong balance sheet but still encounter capacity constraints if substantial surety exposure is already outstanding.

For example, the business might already have:

• Performance Bonds supporting live projects;
• Retention Bonds still outstanding through defects periods;
• Advance Payment Bonds that have not yet fully reduced; or
• Section Bonds awaiting release.

Those obligations may form part of the surety's aggregate exposure when a new application is assessed.

Our Bond Capacity Explained guide looks at individual bond limits, total exposure and available headroom.

Early Information Can Make the Process More Efficient

Where a contractor is tendering for work that will require a Performance Bond, having the likely underwriting information available can help avoid delays once the contract is awarded.

That may include:

• latest filed financial statements;
• up-to-date management accounts;
• details of the proposed contract;
• the draft bond wording;
• current work in progress;
• details of existing bond exposure; and
• information about the wider order book.

Our Surety Bond Information Required guide provides a fuller overview.

A Decline From One Surety Does Not Always End the Tender

Where a contractor's existing provider is unwilling to support a new requirement, it is useful to understand why.

The issue may be the size of the proposed contract, available facility headroom, wording, recent financial performance or simply that the requirement falls outside that market's current appetite.

Different providers can take different views on the same case.

Our Declined Surety Bonds guide explains when an alternative market may potentially be worth considering.

Performance Bond Readiness Can Support Tender Planning

The modest construction growth reported in January provides a useful reminder that contractors should think about bond requirements before new opportunities become live contractual deadlines.

A contractor that understands its likely capacity, has current financial information available and has reviewed the proposed wording is in a stronger position to respond quickly when an employer asks for security.

For businesses expecting a busy tender programme during 2025, Performance Bond readiness should therefore sit alongside pricing, programme and resource planning from the outset.