A reported £14.3bn has been lost to rogue builders in the UK over the past five years, according to research from the Federation of Master Builders. That is not simply a consumer rights story. It is also an insurance and risk-management problem for homeowners, main contractors, subcontractors and the insurers supporting the construction sector.
The issue has come into sharper focus today after the reported case of Adele Greshon, a self-employed hairdresser in Milton Keynes. She paid a contractor £22,500 for building work and now faces a repair bill of around £35,000 after experts identified serious defects, including inadequate foundations, an unsafe roof and building work carried out over a live gas pipe. The case was also featured on BBC Breakfast.
The contractor disputes responsibility and says the loss could have been avoided if the correct consents and inspections had been obtained. That disagreement is important because it shows how quickly a building problem becomes a dispute about contracts, competence, responsibility and insurance.
The wider concern is that the contractor was reported to have operated through several companies, highlighting the problem often described as “phoenixing”. A business accumulates liabilities, closes or enters liquidation, then restarts under another name, sometimes with the same people, tools and client base. The customer may be left with a judgment but no realistic route to recover the money.
As an insurance broker, I think the debate needs to move beyond whether builders should be licensed in principle. The more practical question is what a licensing regime would mean for legitimate contractors across Essex, Kent and London, and where insurance would sit within that system.
1. Insurance could become a licence condition
At present, insurance is often treated as a commercial requirement. A main contractor may ask a subcontractor for a public liability certificate before allowing them on site. A client may request evidence of cover before signing a contract. A lender, property owner or managing agent may also require particular limits.
But these checks are not the same as a national system that verifies whether a builder is permitted to trade.
The FMB’s proposed Licence to Build model includes minimum competence standards, mandatory indemnity insurance and a compensation fund. Under that approach, insurance would not merely be something a main contractor asks to see. It would become part of a formal licensing condition that a regulator or licensing body verifies.
That would create a clearer baseline for customers. A homeowner would have more than a company name, a recommendation and a certificate that may no longer be current. They would be able to check whether the business meets defined standards and whether its insurance arrangements are part of an active licence.
For legitimate builders, this could improve the market rather than restrict it. Good contractors already invest in training, documentation, risk controls and appropriate insurance. A statutory scheme could prevent them being undercut by operators who have lower costs because they ignore those responsibilities.
There would need to be care around how the rules are designed. Insurance requirements must reflect the work being undertaken, rather than forcing every small trade into cover that is unsuitable or unaffordable. A domestic decorator, a general builder carrying out structural work and a contractor designing a complex extension do not present identical risks.
Even so, making insurance part of a properly managed licensing process would be a significant change.
2. The gap is currently carried by customers and insurers
When a building project goes wrong, many customers naturally look first to their home insurance. Unfortunately, standard home insurance is not usually designed to pay for defective workmanship or a dispute about the quality of work.
There may be cover for resulting damage in some circumstances, but that is different from paying to remove and rebuild work that was badly designed or poorly installed in the first place. Policy wording, exclusions and the circumstances of the damage all matter.
This leaves the customer carrying the immediate financial pressure. They may need to pay for temporary accommodation, surveys, legal advice, remedial work and a second contractor while the dispute continues. If the original builder has disappeared or closed the company, pursuing a claim can become even more difficult.
Insurers also feel the effects of this gap. Claims arising from defective roofing, water ingress, unsafe alterations and poorly completed work can become complex and expensive. Even where a policy does respond to part of the damage, the insurer may have limited ability to recover its costs from the contractor who caused the problem.
That is one reason the idea of a compensation fund matters. A properly designed fund could provide a route to redress when a licensed builder becomes insolvent, abandons a project or cannot meet a valid claim. It would not remove the need for suitable insurance, but it could deal with the specific problem of a customer being left without a practical recovery route.
The Government’s measures announced on 28 August 2026, including an approved voluntary code and a milestone-linked Trusted Payments system, may help reduce some consumer losses. However, they are not the same as a compulsory licensing system. The Government announcement confirms that the initial approach is based on voluntary participation.
That means firms willing to join may be easier to identify, but a rogue operator can still remain outside the scheme. This is the concern raised by the FMB and other consumer representatives.
3. Compulsory insurance alone would not stop phoenixing
This is the point that is often missed in public discussions.
Insurance is linked to a business, its activities, its policy period and the terms agreed with the insurer. If a company closes and a new company starts trading, the new business does not automatically inherit the old company’s insurance obligations. A new policy may be arranged, but that does not necessarily provide cover for previous work or earlier liabilities.
There can be complicated legal and policy issues around claims-made cover, notification, insolvency and historic work. The important practical point is that compulsory insurance by itself does not guarantee that a customer will be protected when a company disappears.
A contractor could hold the required policy, complete poor work, allow the company to fail and then start again. The existence of a certificate would not, on its own, answer the questions of competence, accountability or recovery.
This is why the FMB model links insurance with a compensation fund and stronger action around director disqualification. It also shows why company identity checks, while useful, are not enough. The FMB has warned that Companies House reforms may verify who directors are without verifying what a business can do, whether it has suitable insurance or what its trading history looks like. Its March 2026 statement makes that distinction clearly.
A strong licensing scheme would need to follow the responsible people, not only the company name. It would also need meaningful enforcement when a business repeatedly fails customers.
4. The unregulated tail is priced into everyone’s premium
Construction insurance is priced on risk. Insurers look at the type of work, turnover, contract values, claims history, locations, subcontracting arrangements, experience and the controls a business has in place.
They also look at the wider claims environment.
If the market contains a significant number of unverified contractors carrying out poor work, the resulting claims do not stay isolated. Defective workmanship can lead to escape of water, damage to adjoining property, injury, fire, structural movement and long-running legal disputes. The frequency and cost of those claims feed into underwriting decisions.
That does not mean every legitimate builder is being charged directly for every rogue operator. It does mean the wider perception of construction risk can affect the availability and pricing of cover.
Over time, a licensing regime that raises the minimum standard should be positive for Construction Contractor Insurance and General Contractor Liability Insurance. Fewer unsafe jobs should mean fewer avoidable claims. Better records and clearer accountability should also make risks easier for insurers to assess.
There may be an initial cost for compliance, training, accreditation and administration. That is understandable. But responsible contractors are already paying for much of this through their insurance, professional standards and operating procedures. The unfairness comes when businesses that do not meet those standards compete for the same work without carrying the same cost.
5. Good contractors should prepare before legislation arrives
There is no need for a responsible contractor to wait for a licensing law before reviewing their insurance programme.
The first step is to check the policy properly, not just the certificate. A certificate may show a public liability limit, but it will not explain every exclusion or restriction. Contractors should review:
- Public liability limits and whether they reflect the size and type of work undertaken.
- Workmanship exclusions and the distinction between damage caused by defective work and the cost of correcting the work itself.
- Contract works cover for materials, temporary works and the project while it is under construction.
- Employers’ liability insurance where required.
- Professional indemnity insurance if the business designs, specifies, surveys, advises or project manages work.
- Tools, plant, hired-in plant and equipment cover.
- The treatment of subcontractors and whether their activities are properly declared.
- Policy notification requirements where a complaint, defect or potential claim arises.
Contractors should also keep certificates, training records, inspection documents, photographs, contracts and subcontractor checks in an organised file. Accreditation schemes already ask for evidence of insurance and competence, and future licensing arrangements are likely to require more rather than less documentation.
The chain of responsibility deserves particular attention. Main contractors should know who is carrying out specialist work, whether subcontractors are insured, what qualifications they hold and whether their work is being supervised appropriately. This is not about creating unnecessary paperwork. It is about being able to show that reasonable checks were made if something later goes wrong.
Practical next steps for contractors and clients
Mandatory builder licensing is not currently in force across the UK, but the direction of travel is clear. The FMB continues to campaign for a statutory scheme, while the Government’s voluntary measures are intended to improve consumer protection in the meantime.
For contractors, now is the time to review the insurance programme, close any gaps and keep evidence ready. For homeowners and commercial clients, ask for current certificates, confirm that the insured business name matches the contracting entity and understand what the policy does and does not cover. Insurance should support a sound contract and proper competence checks, not replace them.
If you are reviewing Business Insurance Essex, Business Insurance London or cover for a construction business operating across Essex, Kent or London, Moyak Insurance Services can help you examine the risks in practical terms.
Call 01375 392087, email info@moyakinsurance.co.uk or visit https://www.moyakinsurance.org.uk. We provide a personal business insurance brokerage service and work with leading UK insurance markets to help contractors secure suitable cover for their work and budget.