Firms operating in the construction sector encouraged to utilise credit insurance

With an unpredictable housing market and reduced public sector spending, the construction industry remains cautious around its prospects for the coming months.

Figures released by the Construction Products Association (CPA), forecast that despite a relatively strong first half of the year, output will fall over the next few months and continue to affect trading in 2011.

This outlook, combined with the recent high profile problems at social housing maintenance group Connaught, has brought into sharp focus the risks and challenges which face the industry at all levels.

Business failures can have a huge knock on effect across the supply chain, putting cash flow under pressure and in the worst cases pushing other companies into administration.

It is essential therefore that construction firms which anticipate potential problems protect themselves against the risk of bad debt.

Credit insurance policies, such as Lloyds TSB Commercial Finance’s debtor insurance product, safeguard firms against late payments and potential customer insolvencies. This allows a business to trade in confidence, knowing its invoices are protected.

Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance, said: “In 2009, output shrunk in the construction sector by 12 per cent, the fastest pace since 1974 and building firms have been advised to brace themselves for more economic hardship and tough trading conditions.

“Many construction firms, especially SMEs, can be badly affected by cash flow problems elsewhere in the industry and when a major contractor becomes insolvent, a huge number of subcontractors and suppliers are negatively impacted.

“Our debtor insurance policy provides management with vital peace of mind which allows them to trade safely and pursue new growth opportunities with the confidence that their sales ledger is protected.

“For businesses worried about potential bad debt, customers can also utilise our Firstcheck product which acts as a risk assessment tool, allowing them to credit check customers and identify risks early.”