Collapse of Construction Firm ISG Causes Industry Shockwaves

Around 2,200 employees have been made redundant and all projects halted after the construction company ISG collapsed into administration, effective Friday. The UK operations of ISG Group, owned by US-based investment company Cathexis, have ceased trading as of September 20, according to joint administrators, EY.

The affected companies include ISG Central Services Ltd, ISG Interior Services Group UK Ltd, ISG Fit Out Ltd, ISG Engineering Services Ltd, ISG UK Retail Ltd, ISG Retail Ltd, ISG Construction Ltd, and ISG Jackson Ltd. In an email sent to ISG employees, the company attributed the collapse to “legacy issues” from “large loss-making contracts” secured between 2018 and 2020, which significantly impacted liquidity despite recent profitability.

ISG Chief Executive Zoe Price mentioned that efforts to sell the Group were unsuccessful as the potential buyer failed to secure the funding needed for recapitalization. Price indicated that Cathexis also attempted to refinance the company and sell individual business units, but those efforts did not come to fruition within the necessary timescale.

A potential buyer, Antipodean Holdings, expressed dissatisfaction with how the situation unfolded, claiming ISG exited a possible acquisition deal without notice. Andre Redinger, director of Antipodean Holdings, stated that despite discovering ISG’s financial instability, they were still ready to proceed with the acquisition, supported by a turnaround strategy, when ISG stopped communications on September 12.

According to industry sources, ISG’s administration could have ripple effects throughout the construction sector, with concerns expressed by Suzannah Nichol, Chief Executive of Build UK. She stated that smaller firms in the sector’s supply chain might face financial jeopardy due to unpaid dues, a sentiment echoed by workers and suppliers. The company’s administration is notably significant due to ISG’s involvement in more than £1 billion in government contracts, including numerous projects with the Ministry of Justice and the Department for Education.

Liam Byrne, chair of the Business Committee, expressed concerns about the collapse’s potential impact on employment. He stressed the need for improved UK accounting standards to provide an early warning system for investors and stakeholders. The ISG’s downfall follows the high-profile collapse of Carillion in 2018, another indicator of the challenges facing the construction industry in managing thin financial margins.