Construction in crisis

Of all the sectors affected by the recession, construction can arguably claim to have suffered the most. With just over 2.2 million people still employed in the UK's construction industry, most brokers are likely to have a construction firm or related company as a client.

Key construction industry indices have been making stark reading. Data from the Office for National Statistics shows that, between April and June 2007, 10,000 construction workers were made redundant and, with 21,000 vacancies in the sector's job market, this was not alarming. Over the same period this year, 49,000 workers lost their jobs and only 9,000 vacancies existed.

"Due to the recession, sites are being closed or the work is being put on hold because the funding is no longer as available for completion," said David Swigciski, regional training leader for construction at RSA.

Potential issues for closed or mothballed sites include the risks of theft and arson, especially on larger projects that are close to completion. Public liability issues on sites that have been levelled or where trenches have been dug could also be a worry, as one broker commented: "The most serious concern for sites where work has been suspended due to the recession - depending on location and security - would be the risk of trespass."

RSA has warned that if sites do not follow advice given to them by insurance companies then they may not be insured if equipment is stolen or the site is vandalised.

Open door

Swigciski continued: "Brokers should be helping customers understand the advice they are receiving through this difficult period. Broker-customer communication is vital so we can all work to reduce the likelihood of loss. Brokers should always be more than happy to offer advice and help."

Research for the Glenigan Index - an indicator of UK construction activity - showed that commencements of works in the three months to June were down 53% and 45% in the industrial and private housing sectors respectively. Government funding has ensured growth in the education and health sectors although, at between 2 to 3%, it is not proving enough to keep the industry going at pre-recession levels.

According to Julia Evans, chief executive officer at the National Federation of Builders, the entire industry is in decline.

She said: "The outlook is bleak across all sectors. Not only is it becoming increasingly difficult to win work but profit margins are being squeezed for those companies that do manage to land contracts."

Meanwhile, levels of detailed planning approvals in the private housing sector stand at only one-third of last year's total, indicating little chance of improvement in the short term. Global information services provider Experian has predicted no growth until 2011, with a further contraction of 1.6% in 2010.

Swigciski urged brokers to contact insurers where client circumstances change drastically: "We would make sure the broker is involved throughout. Where they wish, they can come on site visits. If each customer improves their risks, it is the best possible way to avoid losses on site and keep business moving."