Cut-price tenders to win construction contracts could leave companies with huge losses, according to research from credit insurer Atradius.
In its latest analysis of the construction industry, Atradius warned that the growing cost of raw materials, labour costs and interest rate hikes could mean that many contracts, especially fixed-price deals, might not return a profit.
It warned the losses could in turn set up a domino effect of bad debts and company failures.
Atradius UK and Ireland director Jon Lindsay, said: “The construction industry is one of the UK's most important and complex business sectors.
“On the face of it, the industry seems to have boomed over the past few years, but the underlying data shows that factors such as under-pricing tender bids and a slow down in new orders are throwing up risks that companies should be aware of.”
The risk analysis is based on trading conditions, economic trends and industry knowledge, said the company.
“The precarious nature of the construction industry at the moment means firms must get an up to date picture of the companies they are working with and the projects they are involved in,” warned Atradius
“Even on major projects, with so many companies sub-contracting to other businesses, it only takes one bad debt to cause a domino effect of firms suffering financial problems, losses and even failure.”
