27/09/2024
If you’re familiar with the UK construction industry, you’ll know ISG as one of the sector’s biggest firms. In fact, with a turnover of £2.2 billion in 2022, it was sixth-largest, and employed almost 3,000 staff. In what is the biggest collapse to hit the sector since 2018, ISG has filed for administration, with operations ceasing immediately and over 2,200 employees made redundant.1
Its closure might have significant consequences for suppliers and subcontractors across the sector, so if you’re concerned that you’ll be affected, read on for our advice on what to do.
What happened?
2022 was a difficult year for ISG with pre-tax profits falling 38% to £11.5 million.2 They had been set to deliver a £3bn gigafactory for Britishvolt, worth £300m to the firm, but this was suspended following Britishvolt entering administration. ISG was left with a significant gap in their order book as a result, and another when a film studio project in Hertfordshire was also suspended. 3 2024 also proved challenging, as amidst significant management changes within the business, ISG lost £14 million when a key supplier went into liquidation. 4 That same month, news of the business’ sale broke, but on 20th September, it was announced that this wouldn’t be concluded.
What ISG had to say
ISG had been struggling financially for some time. In an email to staff last week the Chief Executive of ISG, Zoe Price, said the circumstances had come about due to “legacy issues” connected to “large loss-making contracts” signed before the COVID-19 Pandemic. "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.” 5
Such fixed price agreements have been a key concern of credit insurers. Raw material price rises and labour cost increases since the Pandemic, in a sector operating with low margins, can easily impact profitability. This issue has been compounded by higher interest rates, raising the cost of borrowing for businesses carrying debt.
How might this affect the construction industry?
The failure of a contractor as large as ISG is likely to have a significant impact on the supply chain, with accounts posted by the firm before its collapse showing that suppliers were owed over £700 million. 6 We can look back at the collapse of Carillion in 2018, a construction firm roughly twice the size of ISG. Its closure sent such shockwaves through the industry that it triggered a shocking 20% spike in the number of UK building firms declaring themselves insolvent. 7 In the case of ISG, it's likely that unsecured creditors will have very little chance of being paid and there will be wider implications for the industry in terms of banking support, credit insurance access and bonding capacities.
What do creditors need to know?
You will need to register as a creditor in the administration if:
- You have supplied goods or services to ISG and have not been paid
- You have paid for goods or services from ISG that have not been received
- You’re a self-employed contractor or worker who has not been paid for services already provided to ISG
Creditors must submit a completed Proof of Debt to the Administrators.
If you hold a Retention of Title, it’s also important to notify the Administrator as soon as possible.
Can we help?
You might have seen earlier in the year that SW proudly announced our acquisition of FinCred, UK-based credit insurance brokers and experts in their field. If you could benefit from their expertise here – whether you have any outstanding balances, a credit insurance policy with possible cover on ISG, a surety bond in favour of ISG, or you’ve simply got some questions – they’re here for you.
Simply reach out to the team on 01732 749750 and they’ll be happy to help.
1 The Guardian, September 2024
2 Construction Enquirer News, Septmber 2024
3 Construction News UK, July 2024
4 Building.co.uk, February 2024
5 Construction Wave, September 2024
