Over the last week, we have seen the demise of construction giant ISG, which was recently placed into administration. Thoughts will immediately turn to the demise of Carillion and the carnage that was brought to the construction sector and all supply chains connected with that particular construction giant.
We are looking at a fallout of similar proportions again with the failure of ISG.
Thousands of jobs lost
With immediate effect, administrators EY (Ernst & Young) announced that 2200 would be lost immediately. To put this into perspective, Carillion’s job losses totalled more than 3000. By the time this process is completed, we could be looking at similar losses.
The ISG website is now shut down with the following message presented to those who visit:
ISG Central Services Limited, ISG Interior Services Group UK Limited, ISG Fit Out Limited, ISG Engineering Services Limited, ISG UK Retail Limited, ISG Retail Limited, ISG Construction Limited and ISG Jackson Limited (all in Administration) (together “the Companies”)
On 20 September 2024 the Companies entered administration and Timothy Vance, Alan Michael Hudson and Dan Edkins were appointed as Joint Administrators.
ISG’s UK operations have ceased to trade with immediate effect. No further work will be undertaken on existing UK contracts, including for Construction, Fit Out and Engineering services.
For further information please refer to the Joint Administrators’ website at https://www.ey.com/en_uk/administrations/isg-administrations.
With the news breaking late last week, staff members were finding out the fate of their employer before the leadership of ISG was able to communicate with staff and management. As a result, ISG CEO Zoe Price penned a late-night email to staff to inform them that the news about the collapse of ISG was indeed true:
Some of you may have seen reports in the media that ISG has filed for administration here in the UK. With sadness, I can confirm that this is factually correct.
“This was not the way I wanted you to find out and the news should not have leaked in this way. We had a managed plan to tell you what was happening on Monday once we had more clarity, but news has leaked at the filing stage – and that is why I am writing to you tonight.
“Before I go into any more explanation, I want everyone to know that – contrary to the press reports – you will be paid on Monday as normal. I appreciate this is only a small comfort against a context of uncertainty for you all in terms of what happens next.
Read the email in full here: https://www.constructionenquirer.com/2024/09/20/isg-boss-apologises-to-staff-in-late-night-email/
ISG also held Government contracts, such as the building of new prisons. It was involved in the London 2012 Olympics with the building of the velodrome. It is estimated that ISG had £1bn worth of Government contracts on its books. Their collapse is expected to cause some delays to these projects.
Huge supply chain hit
Companies like ISG have huge supply chain networks. You may remember the carnage caused by the collapse of Carillion in January 2018. The failure of that business caused a ripple effect down the supply chain which also sent SME suppliers to the business under. It is feared that we could see the same with the collapse of ISG.
The fenestration sector is highly unlikely to come out of this episode unscathed. There are likely to be a number of companies from our sector who supplied into ISG who are now going to take a hit from their collapse. This was the case when Carillion went bust six years ago.
The reality is that the supply chain into ISG is on the hook for more than £700m of losses. Figures of this scale are difficult to imagine but it has to be assumed that numbers of this magnitude are going to send some suppliers to the company under along with it.
According to the last set of results published by the company, on a turnover of nearly £2.2bn, they made just £11.5m profit. 2023 as we know was a tough year for us all, including the wider construction sector and this likely compounded problems at a company which has said legacy issues are the main reason for the collapse of the company.
There was hope that after the disaster of Carillion, lessons would be learned by all involved and that another disruptive collapse could be avoided. Perhaps a multitude of external factors, such as the pandemic, skills shortage, and inflation meant that there was always going to be a chance that something like this could happen again. Perhaps we’ll never be able to prevent such huge failures.
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