Credit insurance withdrawal forces contractors to turn down work

Companies battered by the credit insurance drought have told CJ of the difficulties it has created for their businesses.

CJ revealed last week that cover levels are £10bn lower than a year ago.

Barry Mingay, a director of £2m-a-year turnover KB Floors, said his firm took a £40,000 hit when two clients - where work had initially been covered by credit insurance - went bust.

While the jobs had finished, KB's retentions had not yet been released. "The insurers had, in the meantime, downgraded their credit status to 'zero', so when the companies who owed us retentions folded, they told us we were not entitled to anything," said Mingay.

Withdrawal of cover is impacting on the number of jobs being bid for.

Mingay said: "There have been six cases where, as a result of credit cover being pulled completely, we've said 'no' to work that was on offer."

Peter Taylor, managing director of Rigidal Systems, a £20m-a-year turnover manufacturer of metal building cladding products, is suddenly facing financial stress as a result of the withdrawal of credit insurance providers.

Atradius and Euler Hermes have pulled back totally from offering cover on Rigidal and that has given its big three suppliers a headache as they have become fearful of supplying Rigidal.

The only answer to this problem - albeit costly - would be to pay in advance. "Sure, once we could have asked our bank for a new £500,000 facility, but not in today's climate.

"These people are undermining the future of construction companies such as ours," Taylor said.