Clients are being urged to ease bond conditions as contractors struggle to get cover in a tightening market.
The Enquirer revealed yesterday that insurance giant QBE is pulling-out of the construction bonds market for major contractors.
The news sent shock waves through the industry raising fears that new projects could be delayed.
Now contractors are calling on clients to ease bond requirements to avoid the market stalling.
Clients typically demand a performance bond covering 10% of the contract value as a guarantee that the work will be done and a protection against insolvency.
One contractor said: “Hopefully clients will start having a proper look at this or the whole market could stall.
“Things were bad enough before but losing a major bonds supplier like this is a disaster.
“Clients could look for a lower level of cover like 5% or rely on other guarantees like letters of credit or insurance.”
Another leading specialist said: “We try and avoid bonds wherever we can by showing clients that we are financially stable.
“Some firms have been relying on the bond market as a back-up for a bad business leaving the insurance firms to pick up the tab when under bidding came back to bite those contractors on the backside.
“What we will see now is a change in the market as financially stable clients look to work with financially stable contractors and supply chains rather than take a chance on low bids from firms who are surviving hand to mouth.”
