The Growing Importance of Trade Credit Insurance in the Construction Sector
Discover how trade credit insurance aids financial stability in the challenging UK construction sector.
From inflationary pressure to a significant drop in output and fluctuating interest rates, the UK construction sector has faced considerable challenges in 2023. These issues have had a direct impact on project costs and the financial stability of businesses within the industry.
In this blog, our experts from PIB Insurance Trade Credit explore the predicted challenges of 2024 and how it’s possible to navigate these uncertain times and protect your construction business with trade credit insurance solutions.
Trends and challenges predicted for the construction industry in 2024
Looking ahead, the forecast for 2024 remains turbulent, with high interest rates, low profitability, reduced demand and elevated credit risk.
Despite a fall in material costs, many businesses, especially those with fixed-price contracts are struggling to remain profitable after the high inflation period of 2021-2022.
Recent data highlights the industry’s struggle, revealing reduced output in mid-2023 and an ongoing decline in new order inflow since Q4 2022. The Purchasing Managers’ Index for the construction sector suggests a contraction, reinforcing the challenges anticipated for 2024.
Salaries within the sector rose by 5.7% consecutively in the three months leading to August 2023. Although this figure is below the national average, this increase has a significant impact on profit margins.
Additionally, the construction sector faces heightened credit risk, contributing to nearly a fifth of corporate insolvencies in the country, with figures rising by 4% in Q1-Q3 2023.
Potential strains on financial stability
As payment performance has returned to pre-COVID patterns and with longer delays reported, there is increasing pressure on suppliers’ working capital cycles.
There is also increased uncertainty and strain ahead of the next parliamentary elections and the ongoing cladding crisis which further add to the construction sector’s struggles.
How to safeguard your construction business with trade credit insurance
While the forecast for 2024 might seem daunting, there are proactive measures you can take to help fortify your construction business. Trade credit insurance can have a significant impact on the success of your company in the upcoming year.
By shielding businesses from insolvency risks and delayed payments, securing trade credit insurance is an invaluable solution in helping to maintain healthy cash flow, ensuring survival and growth in the construction industry.
Tailored trade credit insurance solutions from PIB Insurance
At PIB Insurance Trade Credit, we understand the numerous challenges businesses in the construction sector are currently facing.
That’s why we’re committed to providing support, to secure your financial foundation and preserve your potential. Our tailored solutions are designed to help construction businesses navigate industry complexities and mitigate risk for future growth.
For more information about the trade credit insurance options available, contact a member of our specialist team today.