But when the official announcement from administrators EY finally came towards the end of last week, it was still major news and represents the biggest construction company failure since the demise of behemoth back in 2018.

Restructuring experts from management consultancy EY-Parthenon were appointed as joint administrators to eight of ISG鈥檚 UK trading businesses on Friday 20 September, resulting in the immediate loss of 2,200 jobs.

A skeleton staff of 200 remain to assist the administrators in winding down the business.

ISG chief executive Zoe Price (Image: ISG)

ISG was a major player both the construction new buildings as well as in the fit-out market, operating across sectors including central and local government, education, financial services, health and leisure, technology, media and communications (including data centres) and retail and hospitality among others.

Its , for the 2022 financial year, showed that turnover was just under 拢2.2 billion (US$2.9 billion). It made a razor-thin pre-tax profit of 拢11.5 million (US$15.4 million) for the year.

Even at that time, the then-CEO Matt Blowers pointed to challenges, with political and economic issues in the UK, including high inflation, rising interest rates resulting in some projects being put on hold or scaled back.

In fact, according to an email sent last week by Blowers鈥� successor as chief executive, Zoe Price, it was legacy issues relating to large, loss-making contracts secured between 2018 and 2020 that saddled the business with liquidity problems that ultimately it was unable to trade its way out of.

ISG鈥檚 US-based owner, investment company Cathexis Holdings, had been trying to sell off ISG over the course of several months. But the would-be purchaser was unable to find the funds to recapitalise the business, according to Price鈥檚 email.

Attempts to sell off individual ISG business units also proved fruitless.

Impact of ISG鈥檚 demise

ISG had a pipeline of work totalling 拢4.3 billion (US$5.8 billion), of which around 拢2.5 billion (US$3.3 billion) were projects already on site, and another 拢1.7 billion worth were projects that had been awarded but had not yet started, according to construction intelligence provider Glenigan.

Glenigan identified 33 awarded contracts, 57 already on site and three due for imminent completion that are now 鈥渦p in the air鈥�.

ISG has worked with the Ministry of Justice for 20 years and in 2023 was appointed to its 5-year, 拢2.5bn construction services framework (Image: ISG)

Those included a 拢200 million deal to build a Fujifilm Diosynth Biotechnologies Facility in Billingham, Cleveland, as well as a 拢200 million (US$267.9 million) project to build phase two of the Slough Data Centre Campus in Berkshire.

Meanwhile, a 拢158 million (US$211.6 million) project to build an Institute of Neurology for University College London (UCL) which topped out last year and was due for completion in 2024 is also affected, as is a 拢150 million (US$200.9 million) data centre project for Vantage Data Centres  in London鈥檚 Ealing.

The company had also been appointed main contractor on a 拢300 million (US$401.8 million) project to build a in Blyth, Northumberland back in late 2020. But ISG was forced to pause work on the prestigious scheme in 2022 and Britishvolt entered administration the following year amid cashflow problems, although the contractor said it had not lost any money on the scheme.

Around a third of ISG鈥檚 total pipeline is public sector work, while industrial, commercial, and private housing projects account for 拢2.8 billion of the total (US$3.7 billion).

It was also on a total of 19 construction frameworks with a combined value of 拢104 billion (US$139.3 billion).

economic director Allan Wilen said, 鈥淚SG鈥檚 demise is set to dampen overall industry workload in the near term as clients look for contractors to complete projects currently on site and as recently awarded projects are re-tendered.

鈥淚ts subcontractors and suppliers will be under increased financial pressure and contractors nationwide will need to review and work with their own supply chain to minimize financial stress and avoid any additional loss of industry capacity.鈥�

Knock-on effect for creditors

The latest financial report available for ISG, for the 2022 financial year, showed that it owed a total of 拢281.7 million (US$377.3 million) at that time in 鈥渢rade payables鈥�, including retentions, to suppliers. Once contract accruals and money owed for taxation and social security, as well as VAT, were taken into account, the total amount in 鈥渢rade and other payables鈥� that it owed rose to 拢710.3 million (US$951.3 million).

The development means uncertainty for subcontractors and other suppliers within ISG鈥檚 supply chain.

A digital render of how UCL鈥檚 centre of neurosicence in London, which was being built by ISG, will look once complete (Image: UCL)

David Crosthwaite, chief economist at the Building Cost Information Service predicted that more construction businesses would fail as a result of ISG鈥檚 collapse.

鈥淸It] 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,鈥� he said.

鈥淐ashflow is critical for construction businesses and as soon as there are negative impacts on cashflow then it doesn鈥檛 take much for those businesses to fail. So, I suspect that insolvency numbers will rise as a result of the ISG failure.鈥�

Meanwhile, the , which works in partnership with government to provide a voice for the construction sector, said it had started to collate guidance for those impacted by ISG鈥檚 administration.

鈥淲e would advise everyone in the industry to ensure that they are managing any impact on their businesses within the terms of existing contractors, ensure that where possible payments are made promptly to suppliers and to await further information.

鈥淚f companies are in particular financial distress, we would encourage them to contact their relevant industry body,鈥� it said.

Fallout for employees

Build UK, a body representing the UK construction industry, said it was working to secure other roles for the more than 130 apprentices, graduates and trainees employed by ISG who have now lost their jobs.

It has called on any businesses that may be able to help to email [email protected].

Build UK鈥檚 chief executive Suzannah Nichol told the that the news of ISG鈥檚 demise was 鈥渄evastating鈥� for the industry.

She told the programme, 鈥淐onstruction remains undervalued, and people underestimate the cost of construction.

鈥淲hile there have been changes since Carillion six years ago, there clearly has not been enough change.

鈥淲e know construction runs on very thin margins. You only need one project to go wrong and get delayed and you start to have cashflow issues.鈥�

Other employees at the company expressed shock at the company鈥檚 demised but for skilled and experienced workers, their prospects for re-employment look hopeful.

The most recent report looking at the requirements for workers in the sector in the UK, published in May this year, put the number of extra workers required to meet UK construction output by 2028 at 251,500.