The construction industry is in shock after major firm ISG fell into administration, leaving thousands of workers unemployed and affecting smaller firms in the supply chain.
Some 2,200 ISG workers have been made redundant, while projects have stopped in their tracks.
It’s thought this could have reverberations in the construction industry, both in terms of the contractors and companies impacted, as well as wider confidence in the sector.
There’s also set to be a scramble to sign contracts to finish projects that are half delivered.
David Crosthwaite, chief economist, Building Cost Information Service, which provides cost and price data in the industry, 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.
“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.”
After the announcement was made trade body Construction Leadership Council met with government figures and construction groups to discuss the impacts on the industry.
The group said in a statement: “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.”
Zoe Price, ISG chief executive, sent an email to ISG staff on Thursday blaming “large loss-making contracts” secured between 2018 and 2020 on the firm’s financial troubles.
She said: “Trading out these projects has had a significant effect on our liquidity.
“So even though we have been profitable this year, our legacy has led us to a point where we have been unable to continue trading.”
She added that there’s been an attempt to sell the group to inject new funds, but no such deal was able to be completed.
ISG Group has been owned by US-based investment firm Cathexis for eight years.
Credit: Source link
