Construction giant ISG’s collapse is set to have a devastating impact on the UK’s construction sector, warns the CEO of Build UK, Suzannah Nichol. Nichol has highlighted the risk faced by smaller firms within the sector’s supply chain, which may not receive payments owed, putting their survival in jeopardy. Over £1bn of ISG’s work is with the UK government, and the firm’s collapse comes as the UK government pledges to increase its infrastructure spending in the coming years.
ISG, which is owned by the US firm Cathexis, has been burdened with financial woes for some time, and its attempts to secure a rescue package fell through. Workers around the UK were made immediately redundant as a result of the firm’s collapse. The company was involved in 69 government projects, including work on prison refurbishment for the Ministry of Justice, according to data analysts Barbour ABI. The collapse is the most high-profile in the UK’s construction sector since Carillion’s collapse in 2018.
Speaking on the BBC’s Today programme, Nichol stated that “construction remains undervalued, and people underestimate the cost of construction. Whilst there have been changes since Carillion six years ago, there clearly has not been enough change.” With construction companies often operating “on very thin margins”, she stressed the need for improvements in the early warning systems provided by accounting, warning that it only takes one delayed project for cash flow issues to occur. Liam Byrne, chair of the Business Committee, was also deeply concerned at the news, which he said could now “imperil thousands of jobs.”
Last week, a government spokesperson stated that contingency plans have already been made in detail. As affected departments work towards ensuring the safety and security of the sites, Nichol’s comments highlight the wider impact felt by smaller firms within the construction sector. With increased government infrastructure spending, the UK’s construction sector needs to swiftly address the financial uncertainties that can arise in large construction projects
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