British contractor ISG Ltd. went into administration, similar to bankruptcy in the US, on 20 September. The company’s sudden collapse left other firms scrambling to respond and led some to call for changes to the way the UK construction industry operates.
The company said it was immediately ceasing UK operations and no further work would be carried out on its contracts in the country. ISG laid off about 2,200 of its 2,400 employees. a court appointed three joint administrators of Ernst & Young LLP to manage the eight affected subsidiaries: ISG Fit Out Ltd., ISG interior Services Group UK Ltd., ISG UK Retail Ltd., ISG Central Services Ltd., ISG Construction Ltd., ISG Jackson Lds., ISG Engineering Services Ltd. and ISG Retail Ltd.
ISG, which is owned by US investment firm Cathexis Holdings, made the equivalent of $15.3 billion in profits on revenue of $2.9 billion in 2022, according to the latest release. financial report available The company is the UK’s biggest contractor to collapse since then Carillion went into administration in 2018.
In an email to staff later shared on social media, ISG chief executive Zoe Price, who was appointed to the role in February, wrote that losses on some large contracts signed between 2018 and 2020 for residential, logistics and distribution projects and data centers had affected their financial situation.
“Therefore, although we have been profitable this year, our legacy has brought us to a point where we have been unable to continue trading,” Price wrote.
Price added that the owners had been trying to sell ISG for months, but a potential buyer had been unable to raise the necessary financing. And efforts to refinance the company also failed to materialize.
The sudden shutdown of the company’s projects left subcontractors and suppliers to document their work, collect equipment from job sites and record outstanding payments. Project owners moved to assure investors that their businesses would not be affected by ISG’s collapse.
“We are working alongside a network of contractors who will enable us to minimize disruption to ongoing ISG projects and explore alternative solutions,” developer Alliance Leisure, a repeat client of ISG, said in a statement.
High risk, low margins
UK construction leaders said the company’s insolvency is a sign that UK contractors have been operating with too much risk and too thin margins. Figures from the Construction Products Association show that 4,373 UK contractors quit between January and July, up 4% on the previous year. Industry group Build UK said in a statement that “for too long, inappropriate risk transfer and unsustainable profit margins have been accepted as a way of doing business” and called for a change in the way the industry operates .
“Construction remains undervalued and people underestimate the cost of building,” said Suzannah Nichol, chief executive of Build UK, in an interview on BBC radio. “While there have been changes since Carillion six years ago, clearly there has not been enough.”
The Construction Leadership Council, a partnership between the country’s government and industry, said it was meeting to discuss how to respond to ISG’s entry into administration and preparing to provide detailed guidance those affected by the collapse of the company.
