ISG collapse ‘devastating’ for construction industry

The collapse of construction giant ISG is “devastating” for the industry and could push other companies into bankruptcy, the head of construction trade body ISG has said.

Susanna Nicol, chief executive of the Building Society, told the BBC’s Today programme that many small companies in the supply chain will now not receive funding, which will put their future at risk.

ISG, which holds government contracts worth more than £1bn, went into administration last week. 2,200 workers were laid off immediately.

Business Committee chairman Liam Byrne said he was “deeply concerned” about what had happened.

ISG is a subsidiary of Cathexis, an American company. It is the sixth largest construction company in the UK in terms of turnover. According to the construction indexwith revenues of approximately £2.2 billion.

In the past, it built the velodrome for the 2012 London Olympics.

The company has been in financial trouble for some time, but attempts to secure a rescue deal have been unsuccessful.

Neil Hallsworth, from Nottingham, has been a project manager at ISG for over 15 years.

Although he was confident he would be able to find new employment elsewhere, he said he was “sad” and “distressed” to learn he was one of the 2,200 workers who lost their jobs at the construction giant.

He said there had been rumours last Thursday that ISG was in trouble, but it wasn’t until 4pm on Friday that he was “told, no jobs, no money”.

“It’s absolutely frustrating to learn this news 15 and a half years later, and for the world to know it before the employees did. I’m very disappointed.

“Some contractors are owed a lot of money.”

ISG chief executive Zoe Price said in an email to staff last week that the current situation was caused by “legacy issues” related to “significant loss-making contracts” signed between 2018 and 2020.

The company is involved in 69 government projects, including the Ministry of Justice’s prison renovation work, according to data analytics firm Barbour ABI.

Last week, a government spokesman said detailed contingency plans had been put in place and affected departments were working to make sites safe.

ISG’s collapse is the highest-profile event in the UK construction industry since Carillion fell into administration in 2018.

Ms Nicol told the Today programme: “The construction industry is still undervalued and people underestimate how much it costs to build.

“While there have been changes since Carillion was founded six years ago, clearly not enough has happened.

“We know that margins in the construction industry are very thin. All it takes is one project going wrong, one project being delayed, and you start to have cash flow issues,” she added.

“ISG had two major contracts that they started and then were stopped by the client, which is not uncommon in the construction industry.”

Liam Byrne expressed concern at the news, which he said could “put thousands of jobs at risk”.

“That’s why we have to change the quality of UK accounting so that it once again provides the early warning system that investors, workers and suppliers deserve.”

Additional reporting by James Kelly