Highlights
- 51% of personal guarantee backed loans in the construction sector for working capital
- The average loan falls 14% from 194,786 in Q2 2025 to £168,193
- 27% of loans for growth and development, asset purchase or acquisition
October 2025: In a shift in focus from Q2 2025, small and medium sized construction firms are focusing on cashflow rather than growth and borrowing less than they were earlier in the year. This is according to the latest business loan data collected by Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance (PGI) to SME owners and directors.
In Q3 2025, half (51%) of personal guarantee backed loans in the construction sector were for working capital - a noticeable increase from Q2 2025 when 35% of loans were for this reason. In contrast, under a third (27%) of loans were for growth and development, asset purchase or acquisitions.
The average loan taken by construction firms in Q3 2025 fell by close to 14% from 194,786 in Q2 2025 to £168,193 a difference of £26,493.
There was also a 25% rise in applications for personal guarantee insurance on the previous quarter showing that the directors and owners of the UK’s construction firms are under no illusions about the risks of personal guarantees for business loans.
Typically, loans taken for working capital assist businesses in slow periods, helping ensure they can pay staff, suppliers, and other short-term obligations on time. With construction experiencing weak growth plus higher labour and materials costs, margins are under pressure. The data from Purbeck therefore suggests that some firms are currently ‘treading water’ until activity improves. As the BCIS recently said – the “get Britain building” rhetoric hasn’t yet turned into delivery.
Todd Davison, MD of Purbeck Insurance Services said: “What we’re seeing is a clear sign of financial strain amongst small and medium sized firms in the construction sector. When over half of personal guarantee-backed loans are being used simply to keep cash flowing, it tells us that many firms are prioritising survival over expansion given cost pressures largely due to the rise in NIC. The Directors of these businesses are taking prudent steps — not only to protect jobs and meet immediate obligations, but also to shield their personal assets through personal guarantee insurance.
“These are resilient businesses, but the message is unmistakable: access to finance is not currently about growth – it’s about buying time.”
