The Construction Leadership Council has convened a meeting between key construction trade bodies, education and skills providers and the Department for Business and Trade to discuss how industry should respond to ISG filing a notice to enter administration.
The CLC’s objective is to ensure that individuals and organisations impacted are given the appropriate support and guidance, and that as far as possible the effect on the wider sector is limited.
In a statement, it said: “The CLC is collating detailed guidance available for those impacted and in the interim, we would advise everyone in the industry to ensure that they are managing any impact on their businesses within the terms of existing contracts, ensure that where possible payments are made promptly to suppliers and to await further information.
“If companies are in particular financial distress, we would encourage them to contact their relevant industry body.
“For the apprentices and graduates who are directly employed by ISG, Build UK and the CITB have established a working group to ensure that placements can be found for as many people as possible.”
David Crosthwaite, chief economist, 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 serious.
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,” he said.
“Cashflow is critical for construction businesses and as soon as there are negative impacts on cashflow then it doesn’t take much for those businesses to fail.
“So, 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 replace with a new contract as soon as possible to avoid compounding any losses.”
The Building Engineering Services Association (BESA) has urged the government to act quickly in response to the collapse of main contractor ISG.
M&E firms are expected to be among the hardest hit by the financial collapse of the £2.2bn turnover business with the loss of more than 2,000 jobs.
Construction data firm Barbour ABI estimates that ISG has unfinished projects worth £1.7bn, including the £150m fit-out of Google’s new headquarters building at King’s Cross, and building services firms are facing millions of pounds of unpaid bills.
Eight divisions, including ISG Construction Limited and ISG Engineering Services Limited, fell into administration on Thursday, although many sub-contractors had been downing tools for some time due to missed payment deadlines.
BESA had been providing emergency support and advice to several members affected by cash flow problems due to unpaid invoices for work on ISG contracts and moved quickly to offer further services as the scale of the collapse emerged.
Contracts secured on a fixed price basis, many before the Covid-19 pandemic, have been blamed for taking down a £4bn plus portfolio of unfinished and planned projects that includes dozens of vital public sector buildings such as schools and prisons, and work for several high-profile private sector clients.
Ranked in the top four UK main contractors, ISG is the biggest construction firm to collapse since Carillion in 2018 and the fallout is expected to be equally damaging. However, BESA chief executive officer David Frise said it was just the latest in a series of company administrations that had been undermining UK supply chains in recent years.
“Sadly, the lessons of Carillion have not been learned and our members and hundreds of other sub-contractors are left to pick up the pieces yet again,” said Frise. “Profit margins in construction are wafer thin and the fragile basis of many contracts means SMEs are particularly exposed.
“Suppliers will feel hugely betrayed, and we know that many were lied to about the status of the business following the sudden departure of senior directors back in February. Several excellent, financially sound firms could go under with significant job losses through no fault of their own because of this.”
BESA’s legal & commercial director Debbie Petford quickly reached out to members when the news broke to remind them of the free services they could access immediately including resources to help with payment issues, contract management, business protection, mediation, and debts.
“We are aware that several members are directly affected by this news, and we want you to know that BESA has your back,” said Petford. “Members have instant access to our dedicated legal & commercial expert team who are always available to help with any concerns or queries regarding contracts or payments – and any contact with us is strictly confidential.”
BESA has also created an ISG Insolvency Information Sheet which explains the administration process to members in more detail, and covers unsecured debt and sub-contractors’ legal obligations.
However, the Association said the government should recognise that the “ISG debacle and the wider woes of the sector” represent a significant threat to its ambitions to grow the UK economy – and urged it to speed up a consultation on new laws to address the ongoing late payment crisis.
