October 2024: The latest data on personal guarantee backed loans to smaller contractors and builders in the construction industry shows a dramatic rise in the demand for finance ahead of the Autumn Budget. Purbeck Insurance Services, the provider of personal guarantee insurance to business owners and directors has revealed a 58% year on year rise in applications for personal guarantee backed loans from construction industry firms in Q3 2024. Personal guarantee backed loans require the business owner to put their personal assets (such as their home and savings) on the line as security for the loan.
Half of construction firms need finance to continue operating
Painting a picture of the financial pressures continuing to face the construction sector, 48% of applications for personal guarantee backed loans in Q3 2024 were for working capital, to keep the business running. This is up from 34% in Q2 2024.
The average size of loan falls
While demand for finance is evident, construction firms are being more prudent about the amount they are borrowing. The data from Purbeck Insurance Services shows a 30% drop in the average size of loan and corresponding personal guarantee demand, from £230,910 in Q2 2024 to £161,163 in Q3 2024.
Todd Davison, MD of Purbeck Insurance Services said: “Higher levels of borrowing can be a sign of improved confidence which would chime with the latest data on construction sector growth[i]. But we know businesses are borrowing less and close to half of those securing finance are using it just to keep the doors open. In effect they are ‘treading water’. We would hope that once firms feel more confident about the outcome of the Budget and the impact of rising energy costs, they will find ways to invest and grow in order to maximise the opportunities being promised under the new Government.”
[i] The S&P Global construction purchasing managers’ index (PMI) recently showed that the UK’s construction sector achieved its fastest growth in over two years.