ISG’s collapse on Friday left around 2,200 workers unemployed and projects paralysed across the country. However, the ripple effect will impact many more people, as hundreds of subcontractors and the supply chain face uncertainty after this dramatic development.
Below are the reactions that some industry bodies have issued so far.
Construction Leadership Council (CLC)
“This morning [20 September], the Construction Leadership Council convened a meeting between key construction trade bodies, education and skills providers and the Department for Business and Trade to discuss how industry should respond to ISG filing a notice to enter administration.
“Our sympathies are with everyone across the industry who is directly or indirectly affected by the administration of ISG, and the CLC’s objective is to ensure that individuals and organisations impacted are given the appropriate support and guidance, and that as far as possible the effect on the wider sector is limited.
"The CLC is collating detailed guidance available for those impacted and in the interim, we would advise everyone in the industry to ensure that they are managing any impact on their businesses within the terms of existing contracts, ensure that where possible payments are made promptly to suppliers and to await further information. If companies are in particular financial distress, we would encourage them to contact their relevant industry body.
“For the apprentices and graduates who are directly employed by ISG, Build UK and the CITB have established a working group to ensure that placements can be found for as many people as possible. If you or someone you know is an apprentice or graduate directly employed by ISG, please contact [email protected] in the first instance.”
National Access & Scaffolding Confederation (NASC)
“NASC is deeply concerned following the recent administration of ISG, the UK’s sixth-largest primary construction contractor. This unprecedented development has left hundreds of subcontractors and their employees facing significant uncertainty, with many small and medium-sized enterprises (SMEs) in the scaffolding and access sector particularly vulnerable to potential insolvency.
“The collapse of ISG threatens the livelihoods of countless scaffolding and access workers across the UK, who now face not only the prospect of unrecoverable debts but also the severe logistical challenges of having equipment tied up at multiple construction sites. These SMEs, which are vital to the infrastructure of the construction industry, often operate on tight margins and cannot afford to absorb such sudden and substantial financial losses.
“NASC is drawing direct comparisons to the 2018 Carillion bankruptcy, which had devastating ripple effects across the construction supply chain and many insolvencies. Subcontractors, especially smaller firms, were disproportionately affected by the insolvency of this major contractor. The current ISG collapse threatens to repeat this pattern, with scaffolding companies facing potential job losses, halted projects, and cashflow crises that could see many pushed to the brink of financial collapse.
“NASC is calling on the government to urgently step in and provide financial assistance and support for scaffolding and access contractors who are now left in limbo.”
Build UK
“This is another challenging day for construction and the impact of Build UK member ISG entering administration will be felt by almost 3,000 employees and throughout the supply chain, which is already under significant pressure.
“There will also be a significant impact on those just starting out on their career in construction and this is where Build UK and its members can make a difference. We are encouraging the following to get in touch via [email protected] as soon as possible:
“Any businesses that may be in a position to help one or more of ISG’s apprentices, graduates or trainees secure another role in the industry.
“Any specialist contractors employing apprentices that may be at risk of losing their job as a result of ISG’s demise.
“And, any ISG apprentice, graduate or trainee that has been affected.
“After a turbulent few years, construction insolvencies are at their highest level for over a decade, which raises further serious questions about the industry’s business model. For too long, inappropriate transfer of risk and unsustainable profit margins have been accepted as the way to do business, despite the recommendations for more collaborative and sustainable ways of working featured in every report since Latham.
“We have to change the way the industry operates in order to prevent more companies from ending up in this position, which is distressing for everyone involved.”
Building Cost Information Service (BCIS)
BCIS’s chief economist, David Crosthwaite, 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 serious.
"ISG directly employed circa 2,200 employees who are now out of a job.
"Further impacts will be felt throughout the supply chain as sub-contractors and suppliers are left unpaid.
"Cashflow is critical for construction businesses and as soon as there are negative impacts on cashflow then it doesn’t take much for those businesses to fail.
"So, I suspect that insolvency numbers will rise as a result of the ISG failure.
"In addition, there will also be a raft of projects, at various stages of completion, that will be left unfinished and which clients will need to replace with a new contract as soon as possible to avoid compounding any losses."
I think it’s too early to say how far the parallels with Carillion truly go, but there are troubling signs. Carillion’s leadership fostered a toxic culture, with an unsustainable growth strategy aimed at masking their enormous hidden deficits. I recall a meeting where a senior figure at Carillion pressured a project director to bid on a prison contract with just five days’ notice, advising him to simply guess the lowest figure to ensure the bid won, despite the high likelihood of financial loss. When the PD refused, the senior figure stormed out, and soon after, unfair pressure was applied, pushing the PD to comply or leave.
If similar practices surface at ISG, it would suggest that little has changed in the industry. As for payment terms with the supply chain, I can only hope ISG was better. Carillion’s approach was notorious—commercial managers were explicitly instructed to withhold payments, often for years, with endless excuses. Even three years before their collapse, their tactics were already unacceptable. It was a disgraceful way to operate.
If the industry’s largest customer, the Government in all its levels simplistically buys 1st past the post, the lowest tender, you’ll get poor outcomes. One of the best systems I’ve seen was a policy of automatically discarding the lowest and highest bidder – you get a much tighter range and none of the kamikaze bids we now see.
First and foremost are the circa 2200 employees who without any notice find themselves without work, the boards tactics in trying to manage the demise is certainly questionable, I am sure most if not all will be re employed or perhaps go into other sectors or employment, next is the supply chain, those who have mitigated their positions hopefully will survive but it will be another knock from Covid and the recent price increases, those who won’t survive will impact far and wide, these are the ones we will not necessarily hear about, so the impact is huge.
I have seen today the bond market will not be impacted as first thought however I am sure there will be implications long term.
So why, the rumours have been rife for months now and although the board/owners was trying to sell my question is how long has ISG been insolvent, I would say in real terms a lot longer than permitted under company rules, governance is there for a reason, I hope the administrators look deep and that the board and directors are held accountable, there needs to be a dramatic change in how contracts are procured, 2 Stage, cost plus, or not the cheapest wins.