Why is There a Difficulty in Procuring Road and Sewer Bonds in the Current Climate?
As the demand for more housing and investment into infrastructure rises, is the state of the UK economy holding new infrastructure back?
The UK economy is navigating a challenging period. While the economy has shown some resilience, with growth in the first half of 2024 and a gradual decline in inflation, the overall economic outlook is uncertain.
It’s no secret that the economy impacts all corners of daily life, and developers are no different. So, how does the current economic climate hold developers back from road bond procurement?
What is Road and Sewer Bond Procurement?
Road and sewer bond procurement involves obtaining a financial guarantee from a surety company to ensure that a developer completes the construction of new roads and sewer systems to the required standards and specifications for adoption.
These bonds are typically required by local authorities and water companies in order to adopt the road or sewer and maintain in perpetuity at the public’s expense. They act as a financial safeguard, protecting the local authority/water company from the costs of incomplete or substandard work in the event of developer insolvency.
Analysing the Current Economic Climate & Its Impact on Bond Procurement
In times of economic uncertainty, surety providers may become more cautious in underwriting new bonds, perceiving a higher level of risk associated with development projects. To compensate for this increased risk, they may demand higher premiums or even decline to provide coverage in some cases.
Surety providers have recognised this increased risk and are implementing changes that limit their risk exposure but leave developers worse off:
- Increasing Bond Fees
Higher bond fees are charged to offset their perceived increase of developer insolvency.
- Tighten Underwriting Criteria
Surety providers may become more selective in the projects they bond, potentially declining coverage for projects at higher risk due to inflationary pressures and the rise of costs.
- Reduce coverage limits
Surety providers may reduce the bond coverage limits, limiting the bond capacity available for developers.
Concerns about a potential recession, rising inflation, and the ongoing impact of geopolitical turbulence create a challenging environment for businesses across all sectors, including the construction industry.
This economic uncertainty significantly increases risk aversion among surety providers. In times of financial uncertainty, road and sewer bond procurement for non-specialist insurance brokers can become incredibly difficult.
Working with RS Bonds Provides a Significant Advantage
As the UK’s dedicated specialists in road and sewer bonds and fully FCA regulated, RS Bonds is uniquely positioned to source and secure the most competitive surety bond solutions on the market. We combine our deep industry knowledge to deliver a process that is simple, efficient, and stress-free for our clients.
Our founding management team brings extensive technical experience, setting us apart with a level of expertise in road and sewer bonds that is unmatched in the industry. This background enables us to navigate the complex nuances of the bond and adoption process.
Owing to our unique position in the market and technical understanding of the adoption process, we have utilised our bond management programme, to identify, educate and attract new underwriters to the market, reducing their exposure and freeing up capacity for them to underwrite more bonds. By mitigating the risk for underwriters, it allows us to provide more solutions to Housebuilders.
- Expert Guidance and Negotiation
As the UK’s market leader in road and sewer bond procurement, RS Bonds possesses in-depth knowledge of the current bond market and its intricacies. Our team of experts can navigate the complexities of the current environment, secure favourable terms with leading insurers, and minimise costs for developers.
- Strong Industry Relationships
We maintain strong relationships with leading bond insurers, giving us access to competitive rates and a wider range of options. This allows us to explore various avenues and secure the most suitable bond coverage for your project requirements.
- Proactive Risk Mitigation
We can help developers proactively mitigate risks associated with bond procurement. This includes assisting with project planning, conducting thorough risk assessments, and identifying potential challenges early on.
- Streamlined Application Process
We understand the importance of efficiency. Our streamlined application process minimises delays and ensures a smooth experience for developers. We guide you through each step of the process, ensuring all necessary documentation is submitted accurately and on time.
- Dedicated Support
You’ll have a dedicated client account manager who will be your point of contact throughout the entire process. Our team provides ongoing support and guidance, ensuring you are informed and that any questions or concerns are promptly addressed.
Get in Touch for Smooth Road Bond Procurement
RS Bonds is the only company in the UK that specialises exclusively in road and sewer bond procurement on behalf of housebuilders.
We have a 100% track record of securing bonds for our clients, regardless of their financial strength.
Contact us today to discuss your specific project needs and learn how RS Bonds can help you navigate the complexities of road and sewer bond procurement in the current economic climate.
