ISG collapse will have far-reaching consequences

The collapse of ISG in the UK will have far-reaching consequences across the industry and take months, potentially years, to unpick.

In a statement released by the firm, it confirmed it had entered administration, saying: ‘ISG’s UK operations, which provided construction and related services in the UK, have ceased to trade with immediate effect. As a result, no further work will be undertaken on existing UK contracts, including for Construction, Fit Out and Engineering services.’

Dr David Crosthwaite, chief economist at BCIS, said: ‘The failure of ISG is likely to have serious knock-on effects for the sector. This is the largest business failure since Carillion and the ramifications will no doubt be significant.

‘ISG directly employed circa 2,200 employees who are now out of a job. Further impacts will be felt throughout the supply chain as sub-contractors and suppliers are left unpaid.

‘Cash flow is critical for construction businesses and as soon as there are negative impacts on cash flow, then it doesn’t take much for those businesses to fail. I suspect that insolvency numbers will rise as a result of the ISG failure.

‘In addition, there will also be a raft of projects, at various stages of completion, that will be left unfinished and which clients will need to novate as soon as possible to avoid compounding any losses.’

In an email to staff, ISG’s chief executive Zoe Price, said: ‘The group’s trading and cash performance has been impacted by legacy issues relating to the large loss-making contracts secured in between 2018 and 2020 (primarily in the residential, logistics & distribution sectors as well as some data centre projects).

‘Trading out these projects has had a significant effect on our liquidity. So even though we have been profitable this year, our legacy has led us to a point where we have been unable to continue trading.’

Although the construction sector has seen numerous insolvencies among smaller firms, the impact is of course more significant when a major tier 1 contractor collapses and the full scale of ISG’s difficulties and any contributing factors will no doubt be laid bare in the coming weeks and months.

Dr Crosthwaite said: ‘The latest accounts filed showed £2.2 billion turnover and just £11.5 million profit before tax in 2022. That is not a sustainable return.

‘As the fallout continues and we start to see the ripple effects through the supply chain, questions have to be asked about what was actually learned in the aftermath of the Carillion collapse and how are we here again?’

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