The bond is no longer a formality.
That is the clearest message from the latest UK surety market update published by Gallagher Specialty and reported on 27 August 2026. The market had been recovering after several years of severe construction insolvencies, but the collapse of Ardmore Construction Group could now create surety losses of up to £100 million.
For contractors, developers and brokers across Essex, Kent and London, the concern is not simply the size of the loss. It is what caused it.
Ardmore is a warning that surety losses are no longer driven only by project overruns, poor cash flow or a contractor being unable to finish a contract. Building Liability Orders under the Building Safety Act 2022 create a separate route to loss, allowing historic building-safety liabilities to reach across a corporate group years after a project has been completed.
This is the third instalment in our construction insolvency series. We first looked at what happens when your subcontractor goes bust, followed by the risks when your main contractor fails. This time, the focus moves to where much of the financial pain appears next: the bond and surety market.
What happened to Ardmore?
Ardmore Construction Group entered administration on 11 June 2026, alongside related businesses including Ardmore Major Projects, Ardmore Regeneration, Ardmore Fitout and Landmark Facades.
The trigger was a £14.9 million Building Liability Order made under the Building Safety Act 2022. The order followed fire-safety defects at Admiralty Quarter in Portsmouth, a development completed in 2009.
The BLO extended historic liabilities from Ardmore’s collapsed contracting arm to related companies within the wider group. Around 275 jobs were lost when the group entered administration.
This matters because the original construction work was completed many years ago. The problem was not simply that Ardmore had taken on a project it could not complete. A liability connected with historic building defects reached across the group and placed substantial pressure on companies that were connected to the original contracting entity.
Our earlier article, Courts Can Now Reach Your Whole Company Group, explains the wider Building Liability Order developments. The surety market now has to consider what those developments mean for bonds written across the sector.
Why a BLO creates a new surety risk
A performance bond is designed to protect an employer or project owner if a contractor fails to perform its obligations. A payment bond may provide protection around sums due to certain parties, depending on the wording and applicable arrangement.
Traditionally, surety losses have been associated with familiar construction problems:
- A contractor becomes insolvent during a project.
- A project runs materially over budget.
- Subcontractors and suppliers remain unpaid.
- The employer must appoint a replacement contractor.
- The surety pays under the bond and attempts to recover its loss.
A Building Liability Order introduces a different type of exposure. It can allow historic liabilities relating to building safety defects to move beyond the original contracting company and into associated companies, where the statutory requirements are met and the court considers it just and equitable.
That means a contractor or group may face serious liability long after practical completion. It also means a surety assessing the group may need to look beyond current order books and recent accounts. Historic residential work, group structures, remediation discussions, guarantees, previous claims and potential fire-safety issues may all become relevant.
This is the structural point that should not be missed: BLOs are a distinct driver of surety losses, separate from project overrun or short-term cash-flow failure.
The market was already recovering from major losses
The potential Ardmore loss arrives after an extremely difficult period for UK construction sureties.
Bond premiums reportedly rose to more than £1 billion at their peak, compared with approximately £200 million in 2022–23. This followed a wave of insolvencies, including roughly 4,370 construction company collapses in the year to November 2023.
Sureties responded in predictable ways. Underwriting became more cautious, financial information requirements increased and stricter indemnities were demanded from contractors and their directors or group companies.
The market has also absorbed substantial losses linked to Buckingham Group, ISG, Readie and Henry Construction. Surety providers are understood to have recovered nothing from those collapses, while Henry alone was estimated to have generated around £160 million in losses for the bond market.
Gallagher Specialty’s Niki Setchell, a surety partner, has warned that the potential Ardmore losses could erode confidence in the recovery and keep tightened criteria and indemnity requirements in place for the foreseeable future.
That does not mean the wider construction market is necessarily entering another collapse cycle. Order books remain strong and new capacity is entering the market. But it does mean contractors should not assume that terms will return to the easier conditions seen before the insolvency wave.
New capacity is available, but it is not unlimited
There are positive developments. New capacity from providers including Rokstone, Advent and Intact is helping to offset earlier withdrawals by QBE and First Underwriting in 2024.
Rokstone has established a dedicated UK and Ireland surety division led by Darren Guymer, supported by A-rated capacity. This gives brokers and contractors another route when arranging contract bonds, particularly where a bank guarantee is unsuitable or would place too much pressure on borrowing facilities.
However, new capacity does not mean automatic capacity for every contractor. Sureties still need to understand the risk they are taking, and Ardmore is likely to make them more attentive to historic liabilities, corporate structures and the quality of indemnity support.
Contractors in a stronger negotiating position are being advised to ask whether a 5% bond can be accepted instead of the more usual 10% bond. That can materially reduce the facility required and the cost of providing security, but it needs to be agreed before the contract is finalised.
Retention reform could make bonds even more important
The proposed Small Business Protections (Late Payments) Bill, also referred to in policy discussions as the Commercial Payments Bill, could further increase demand for surety products.
The Bill was introduced in the House of Lords in May 2026 and is not yet law. Its proposals include:
- A maximum 60-day payment period for relevant commercial contracts.
- A ban on cash retentions in construction contracts after the proposed transition period.
- Financial penalties for unlawful withholding, with discussions around penalties potentially reaching 50% of the retention debt.
- Stronger enforcement of payment obligations.
Retentions typically represent around 3% to 5% of the contract value, and industry estimates suggest that between £3 billion and £6 billion may be tied up in retentions in England.
If cash retentions are removed, employers and main contractors will still want security against defective work, non-performance and insolvency. Retention bonds, performance bonds, escrow arrangements and other forms of surety may become more important as alternatives.
That could create more demand for bonds at precisely the time when sureties are reassessing their exposure. Contractors should therefore plan for both availability and cost rather than treating a bond as an administrative requirement to be dealt with after winning the work.
What sureties are likely to ask contractors for
A contractor seeking a performance or payment bond should be ready to provide more than a basic application form.
A surety may want to see:
- Recent audited or certified financial statements.
- Management accounts and current cash-flow forecasts.
- Details of existing and proposed contracts.
- A schedule of work in progress.
- Claims, disputes and adjudication information.
- Evidence of completed projects and client references.
- Details of bank facilities and borrowing headroom.
- Parent company support or group guarantees.
- Personal or corporate indemnities.
- Information about historic building work and remediation issues.
- Details of the wider corporate structure.
The indemnity point is particularly important. A surety normally expects to recover losses from the contractor and agreed indemnifying parties if it has to pay under a bond. The extent of that support can affect both underwriting and pricing.
Contractors should also understand whether the requested bond is conditional or on-demand, what events allow a call, how the bond limit operates and whether the wording matches the underlying contract. These are not points to leave until a project is ready to start.
A practical checklist for contractors in Essex, Kent and London
Before bidding for work that requires a bond, I recommend taking the following steps:
- Start the bond conversation early. Approach a broker and surety before the tender is submitted, not after the contract has been awarded.
- Prepare financials and references. Have current accounts, management information, cash-flow forecasts and evidence of successful completed projects ready.
- Understand indemnity demands. Check what personal, parent company or group indemnities may be required.
- Compare 5% and 10% options. Ask whether the employer will accept a lower bond percentage and calculate the impact on cost and facility usage.
- Review your group structure. Identify current and historic parents, subsidiaries, sister companies and project companies that could be relevant to BLO exposure.
- Keep records of historic work. Retain contracts, drawings, certificates, inspection records, correspondence and remediation information for appropriate periods.
- Factor bond costs into bids. Include premiums, collateral requirements, legal costs and the effect on borrowing capacity.
- Review Construction Contractor Insurance. Check that your liability, contract works, professional indemnity and other covers reflect the work and entities involved.
- Review General Contractor Liability Insurance requirements. Make sure contractual liabilities, public liability, products liability and design responsibilities are properly considered.
- Use specialist advice where necessary. A broker with access to leading master insurance brokers and surety markets can help compare terms rather than relying on the first available facility.
For firms looking for Business Insurance Essex or Business Insurance London, bond requirements should be reviewed alongside the wider insurance programme. A growing contractor working on London residential developments may have very different exposures from a specialist firm operating on commercial refurbishments in Kent or managing a depot and workforce in Essex.
Conclusion
Ardmore has changed the surety conversation.
The issue is no longer only whether a contractor can complete its next project. Sureties are also looking at historic liabilities, group structures, building-safety exposure and the possibility that a claim may emerge years after completion.
The bond market may have new capacity, but confidence is being tested by a potential £100 million Ardmore loss. That is likely to keep underwriting criteria and indemnity requirements tighter for some time.
Contractors should start bond discussions earlier, maintain better financial records, understand what their group structure exposes them to and include the cost of security in every serious bid. They should also review their Construction Contractor Insurance and General Contractor Liability Insurance alongside the bond, because a bond does not replace liability cover and liability cover does not automatically respond to every bond-related loss.
For contractors and developers across Essex, Kent and London, a specialist insurance broker can help turn a late-stage bond problem into an issue that is addressed properly at the beginning of the project.
This article provides general information only and is not legal or financial advice. Building Liability Orders, bond obligations, indemnities and insurance responses depend on the facts, contract terms and policy wording. Obtain professional advice on your specific circumstances.
Frequently asked questions
What is the Ardmore impact on the UK surety market?
Gallagher Specialty’s mid-year 2026 update indicated that Ardmore’s collapse could result in market-wide surety losses of up to £100 million. The loss is significant because it follows several major construction insolvencies and comes as the UK surety market was beginning to recover.
Why is a Building Liability Order relevant to surety losses?
A Building Liability Order can extend certain historic building-safety liabilities from an original contracting company to associated companies in the wider group. This creates a source of loss that is separate from ordinary project failure, overrun or cash-flow problems.
Should contractors request a 5% bond instead of a 10% bond?
Where the contractor has a strong financial position and negotiating leverage, it may be sensible to ask whether a 5% bond is acceptable. The employer must agree, and the appropriate percentage will depend on the contract, project and risk allocation.
What information does a surety need before issuing a bond?
A surety will commonly want financial statements, management accounts, cash-flow forecasts, work-in-progress details, contract information, claims history, project references, banking information and details of proposed indemnities and group support.
Could bonds replace cash retentions?
If proposed construction retention reforms become law, retention bonds and other forms of surety may become more common alternatives to withheld cash. The final legal position and implementation timetable should be checked before relying on a particular arrangement.
Does Construction Contractor Insurance cover a bond claim?
Not automatically. A bond is a separate contractual security instrument, while Construction Contractor Insurance responds according to its own policy wording. Liability, professional indemnity, contract works and other sections may be relevant to particular circumstances, but the policy must be reviewed carefully.
What should a contractor in Essex or London do now?
Start bond discussions early, prepare accurate financial information, review indemnity requirements, assess the exposure created by historic projects and check Construction Contractor Insurance and General Contractor Liability Insurance against current contractual obligations.