Aftershock likely after construction giant collapses

Joint administrators at EY have been appointed at the sixth largest construction company in the UK, ISG.  The construction giant’s collapse has led to a reported 2,200 employees being made redundant and trade ceasing following the failure to find a buyer.

Shock
Workers and suppliers are reportedly devastated and shocked by the news of the company responsible for constructing the iconic and sustainable Velodrome at the Olympic Park entering administration.  In addition to their 2012 London Olympic achievement ISG boasted contracts with 9 central government projects totaling more than £1 billion, including work on prisons for the Ministry of Justice, according to data analysts, Barbour ABI. It was also responsible for building the two futuristic Compton and Edrich stands at Lords Cricket Ground.

Collapse
In October 2023 the company dismissed rumours of financial struggles.  In November 2023 an ISG spokesperson said “Some six to eight weeks ago, we were alerted to unsubstantiated, wholly inaccurate and false claims that were circulating about our business. As you would expect, we actively reached out to our stakeholders with facts and truth.”

Cracks started to emerge in January 2024 when their CEO and CFO left the business. Light appeared to be at the end of tunnel in July when chair, Matt Roche, announced to staff and suppliers, that its private equity owner, Cathexis, was closing in on a sale of ISG and that all regulatory approvals had been received. Mr. Roche said ““The buyer has confirmed that the sale will include a significant investment, which will recapitalise the business and support the return to normal trading.”

Despite hope that a deal would be struck, the construction company responsible for the impressive feature ceiling at dining destination, Halle Place, in the Manchester Arndale shopping centre have continued to struggle post covid. No buyer was found and on 17 September one of its creditors, Alandale Logistics, presented a winding up petition.

Following a directors application for administration, the CEO, Zoe Price, emailed staff to tell them “ISG has filed for administration here in the UK”. She added “This was not the way I wanted you to find out and the news should not have leaked in this way.”

Ms. Price said that the company’s struggles were a result of "legacy issues relating to the large loss-making contracts secured in between 2018 and 2020".

"Trading out these projects has had a significant effect on our liquidity," she added. "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."

Experts have also attributed rapid expansion into Europe, Brexit, the Ukraine war and a wide diversification strategy as contributing to the demise of ISG.

A spokesperson at EY confirmed that finding a buyer had not been fruitful in that the potential buyer “could not, despite repeated requests of them to do so, adequately demonstrate that they had the funding needed to recapitalise the business and keep it solvent”

Aftershocks
The company was placed into administration on Friday 20th September with concerns about the aftershocks being raised by industry experts. The biggest collapse in the industry since Carillion in 2018 is likely to send shockwaves. Build UK boss, Suzannah Nichol warned that ISG’s collapse could result in supply chain partners also folding.

Dr David Crosthwaite, chief economist at Building Cost Information Service, 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.”