Credit insurers are looking at withdrawing policies from companies in the construction market, leading figures within the insurance industry have warned.

Industry observers believe the construction sector could be the next to be hit by insurers refusing to provide cover for suppliers, a move that hastened the recent failure of retailers such as Fopp, the music chain, and ScS Upholstery.

Shaun Purrington, director at Atradius, one of the big three credit insurers, said: 'Construction is one of the sectors we feel very uncomfortable with. We could see good companies failing because they run out of money and liquidity.' He refused to say which companies were most at risk.

His words were echoed by Stuart Lawson, director in the trade credit department of Aon, the insurance brokers. He said: 'Even household names have had their limits and capacity with insurers reviewed, and we have seen some policy cancellations. We expect insolvencies in the sector to increase exponentially in the next few months.'

Financial Times