Industry warned that cut-price tenders will lead to losses

Cut-price tenders to win construction contracts could end up with companies incurring huge losses, a leading UK credit insurer for the construction industry has warned.

In its latest analysis of the construction industry, Atradius warns that growing raw material prices, labour costs and looming interest rate hikes could mean that many contracts, especially fixed-price deals, might not return a profit.

These losses could in turn set up a domino effect of bad debts and even company failures.

The risk analysis is compiled by construction underwriter Atradius to help firms assess the level of risk in the industry so they can put in place measures to protect their businesses from problems such as customers going bust or bills not being paid.

Jon Lindsay, Atradius director of UK and Ireland, said: "The construction industry seems to have boomed over the past few years, but the underlying data shows that factors such as under-pricing tender bids and a slow down in new orders are throwing up risks that companies should be aware of."

The risk analysis is based on data such as trading conditions, economic trends and industry knowledge.