MORE than 44,000 UK construction firms closed last year, according to new analysis from Mactavish, a specialist outsourced insurance buyer and claims resolution expert.
The firm said the 44,430 closures was 4.16% higher than in 2019, 18.42% higher than in 2018 and 21.54% more than in 2017.
The 37,485 new construction firms launched in 2020 represented a 26.2% decrease from 2019, when over 50,000 new businesses were established.
Mactavish said one reason why more construction firms are closing is because insurance premiums are ‘increasing dramatically’.
Bruce Hepburn, CEO of Mactavish, said, “The Covid-19 crisis has had a devastating impact on the construction industry. As the risks facing the sector increase and insurers are generally increasing premiums to improve their margins, many construction firms are finding it difficult to pay their premiums. Some are having to cut back on the quality of their cover or on their operations, and for some it is the final nail in the coffin.
“However, there are ways you can reduce premiums and also improve the quality of cover, such as having two brokers pitch for your business along with their preferred insurance partners, as opposed to just using one broker, which is what most companies do today.”
Mactavish is advising that construction firms should ‘start from the ground-up’ and develop a ‘robust understanding’ of the key scenarios they want to be covered and the relevant structures of project and parties involved.
The business said the other crucial area of focus in a hard market is how construction firms market their risk effectively. This, Mactavish explained, involves improving insurers’ understanding of their exposures and developing a bespoke risk prospectus.
Hepburn added, “In a hard market, you shouldn’t see buying insurance as a procurement decision, Instead, you need to understand that you are seeking capital from insurers and approach your renewal on that basis. You must ask yourself: how can I help my firm stand out? How can I communicate how we manage and mitigate risk so that we get the best possible terms from underwriters?”