Six subsidiaries of main contractor ISG have filed notices to enter administration, sending shockwaves through the UK construction industry. The firms that filed notices late on Thursday afternoon are: ISG Construction Limited, ISG Engineering Services Limited, ISG Retail Limited, ISG UK Retail Limited, ISG Jackson Limited and ISG Central Services Limited. The successful ISG Fitout limited, which made a £24m profit and turned over more than £500m in last reported accounts, has not been included in the court applications.
Chaos on Construction Sites
Chaos descended on many sites on Thursday as rumours spread throughout the industry that ISG’s financial problems had finally come to ahead. Subcontractors were reported to be downing tools on several sites amid worries they would not get paid. It is not yet confirmed which administrators will be appointed to the £2.2bn turnover business, which employs around 3,000 staff, although rumours have been circulating that Ernst & Young will be called in. The application to appoint administrators comes just days before staff were due to receive monthly salaries on Monday.
Financial Tsunami in the Supply Chain
The failure of the top four main contractor will send a financial tsunami through the industry supply chain with the M&E sector looking likely to be hardest hit. Concern about ISG’s financial problems began to emerge at the start of the year but the firm managed to juggle payments to the supply chain. One subcontractor told the Enquirer: “They didn’t contest payment applications like many firms do, they just missed payment runs now and again at first.”
A Series of Warning Signs
The sudden departure of CEO Matt Blowers and finance director Karen Booth in February raised the alarm again. But subcontractors were promised a fundamental reset under a new in-house management team at the business owned by the Texan billionaire William Harrison through his Cathexis company. Just three months ago, Cathexis tried to quash rumours of ISG’s ongoing struggles announcing it was about to strike a deal with an overseas buyer from South Africa, which would lead to a promised £100m capital injection to support a return to normal trading.
A Deal that Never Materialized
Despite months of reassurance that the deal was imminent a takeover deal never materialised. The collapse of ISG is a stark reminder of the fragility of the construction industry, particularly in the face of economic uncertainty and rising inflation. The impact of this news will be felt throughout the supply chain, and it remains to be seen how the administrators will proceed with the business.
What's Next for ISG?
The future of ISG remains uncertain. The administrators will be tasked with assessing the company's financial position and exploring all options, including potential sale or restructuring. The fate of the 3,000 employees and thousands of subcontractors who rely on ISG for work will depend on the outcome of this process.
