ISG collapse risks £1.84bn of government contracts
Contractor ISG held at least £1.84bn in government contracts before its collapse, causing a headache for the prison-building programme, Construction News has revealed.
The UK’s sixth-biggest contractor will soon go into administration, its chief executive confirmed last night in an email to staff and suppliers, after six subsidiaries had already lodged administration applications.
Freedom of Information requests submitted by CN show the bulk of ISG’s government work came from the Ministry of Justice (MoJ), with which it held £1.65bn in contracts as of 26 June, a week before chair Matt Roche told staff and suppliers the firm was “very near” to being sold.
A government spokesperson said: “We have implemented our detailed contingency plans and affected departments are working to ensure sites are safe and secure.”
ISG was appointed to several high-value prison jobs. The MoJ continued to award the firm prison work – including the £300m HMP Grendon in January – even as rumours swirled about the state of its finances.
ISG was also one of four partners on the MoJ’s pioneering £1bn prison-building “alliance”, working alongside Kier, Laing O’Rourke and Wates to build four male prisons.
According to CN the government is already looking at the possibility of asking one of the other contractors on the alliance to step in to pick up ISG’s work.
An MoJ spokesperson said: “We have robust contingency plans in place to mitigate the impact on our prison and court estate of ISG going into administration.”We will work with administrators and will find alternative ways to deliver these projects where necessary.”
The Department for Education (DfE) had £190.5m in ongoing contracts with the firm, as of June. ISG picked up several multimillion pound school building projects after being awarded eight regional lots on a four-year £7bn DfE framework in 2022. Of the £190.5m, more than half – £101.3m – related to projects in the main construction phase. Around £80.5m worth of projects were in the defects liability period and £8.7m in the preconstruction phase.
Clegg ‘held back’ by legacy fixed-price contract issues
The employee-owned contractor said that strong trading through the year had been held back by completion of remaining fixed-price contracts secured in earlier years.
These final challenging projects had a cost base from 2020 and included student accommodation, care and residential projects affected by market pressures throughout, including subcontractor failures. But a sharper focus on negotiated work and repeat business saw revenue rise 7% to £77m generating a profit of £330,000 in the year to December 2023.
Clegg said it now enjoys a pipeline of well-performing contracts trading through 2024 and extending into 2025, which was built across several sectors providing resilience in the supply of work and funding streams. It includes defence, education, residential, care, leisure and commercial jobs ranging from £5m to £35m.
The design management department was expanded to a team of seven with the position of Head of Design created to lead process development and impart necessary protocols to deliver schemes following the changes brought about by the Building Safety Act.
The overall Clegg Group performance, which includes specialist contracting arm Clegg Food Projects, reported revenue down slightly at £159m with pre-tax profit down to £560,000 from £1.5m previously.
"It’s not just contractors who have to deal with low margins"
Yoo Capital co-founder says collapse of ISG was ‘reality’ following string of global challenges including covid and Ukraine war
The developer behind the overhaul of the Olympia exibition venue has defended low margins for contractors after a series of design changes on the £600m scheme which are believed to have contributed to Laing O’Rourke posting its worst ever set of results.
Yoo Capital co-founder Lloyd Lee said “everyone is under pressure” and administrations of firms such as last week’s collapse of ISG are “the reality of what happens” due to the impact of global events such as the covid pandemic and the Ukraine war.
Speaking at the Labour conference in Liverpool, Lee admitted there had been “a few” changes on the project but “actually there hasn’t been that many, and in the end, it’s fine”.
Asked about the impact of low margins on contractors in the wake of the collapse of ISG, Lee said: “All businesses today are under pressure. It’s the reality of what happens when you have a 2008/9/10 event, you end up in a Brexit event, then you end up in a covid event, then you end up in a Ukraine event and the world keeps creating global macroeconomic pressures.
“All businesses are suffering. Everyone’s under pressure, the only thing you can do is push back together as a united force,” he said.
Lee declined to say whether he was in favour of a 5% minimum margin for contractors but said: “I think in the end, all margins are under pressure, ours are under pressure, local businsses are under pressure, local restaurants are struggling… In the end, that’s pervasive across all industries.”
HS2 cuts will leave line as a ‘monument to British mentality’, Manchester mayor says
Andy Burnham tells Treasury it needs to invest more in transport schemes if it wants growth in all regions
Andy Burnham has said stopping HS2 at Birmingham will leave the railway as a “monument to the British mentality” in a stinging attack on Treasury spending decisions.
The Manchester mayor told the Labour conference in Liverpool that the truncated line would be a constant reminder of regional inequality and that some parts of the country are “more equal than others”.
Climate and industry leaders lay out new rules to prove buildings meet net zero carbon
Leading climate and industry bodies have today published the pilot version of a new standard approach to prove that buildings are net zero carbon.
Organisations including RIBA, the RBE, the UK Green Building Council, and the Carbon Trust have laid out the pilot for the UK Net Zero Carbon Buildings Standard.
The initiative aims to provide one common methodology for developers, architects and occupiers to verify that a building meets net zero requirements.
Specifications around building energy performance and construction quality appear in the standard, with guidance around avoiding fossil fuel use on-site, operational energy use, renewables and refrigerants, as well as carbon emissions associated with materials and construction processes.
Katie Clemence-Jackson, chair of the standard’s technical steering group, said: “The Standard has been created not just using industry data on what is achievable, but also cross-referencing this with ‘top down’ modelling of what is needed to decarbonise our industry in line with 1.5°C aligned carbon and energy budgets. It covers all the major building sectors, as well as both new and existing buildings.
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