A recent large spike in contract awards suggests that the negative effects of ISG collapse are still to come, says construction analyst Barbour ABI.
Contracts awarded for construction projects in the UK were up 76% to £10.7bn in September due to two large infrastructure projects: the Hornsea Offshore Wind Farm (£3.6bn), and the East Birmingham to Solihull Metro Extension (£735m).
Leaving these two projects aside, Barbour ABI analysts said contract awards remain roughly in line with previous months. This suggests that ISG’s fallout has yet to fully impact the sector.
The industrial sector, where much of ISG’s onsite work has been, saw the largest proportional increase, at 289% to £1.2bn after a dip in recent months.
Almost half of this value came from the £500m Jaguar Land Rover gigafactory in the South West.
Ripple effect ‘extremely worrying’
Barbour ABI head of business and client analytics, Ed Griffiths, said: “Looking forward, there continue to be some key risks to growth in the construction sector; continuing materials price inflation, skills shortages and an ageing demographic of construction workers.
“Additionally, construction insolvencies are at their highest level since the financial crisis of 2008. Notably, this month saw Tier 1 contractor ISG fall into administration.
“ISG’s headline-grabbing work on 69 ongoing central government projects is just the tip of the iceberg when you look at the full data set of the company’s contract portfolio. The ripple effect will be extremely worrying for the sector.”
