Update 28th October
First large casualty of the ISG administration can be seen here https://www.punchline-gloucester.com/articles/aanews/cheltenham-lighting-firm-goes-into-administration
Update 22nd October
Administrators at ISG have discovered that the company owes some £89m to its trade creditors, with 13 subcontractors owed more than £1m each.
“Keith Steven of KSA Group commented, with over £180m of debt owed to trade suppliers, contractors and subcontractors, this will have hit the construction sector hard. Many creditors will experience trading losses as a result. And with recoveries from the administrators and liquidators work expected to be close to zero or zero, this will have a huge impact on creditors.”.
ISG, the construction company and UK Government contractor, has entered administration, making 2,200 workers redundant with immediate effect.
Based on turnover, ISG was the sixth largest construction company in the UK, with revenues of around £2.2bn. Despite this, the firm has faced financial strain for some months and attempts to secure a rescue deal failed.
ISG Chief Executive, Zoe Price, explained the situation had arisen due to ”legacy issues” relating to ”large loss-making contracts” secured between 2018 and 2020.
A notable project ISG completed was the Velodrome for the 2012 Olympics. Most recently, the contractor was working on 69 Government projects – 22 of these for the Ministry of Justice.
A spokesperson of Ministry of Justice said that contingency plans were in place to mitigate the impact of ISGs collapse. Administrators will be worked with, to ”find alternative ways to deliver these projects where necessary”.
As of yet, no administrators have been confirmed as appointed, but rumours are circulating that it will be Ernst & Young.
The last time there was a high-profile collapse in the construction sector was in 2018 with Carillion’s administration. The aftermath of that collapse was lengthy delays in projects and in addition, increased costs. Is the same going to happen for ISGs paused projects?
The collapse of yet another big construction company highlights cracks in the UKs construction industry and certainly raises some questions.
Suzannah Nichol, CEO of Build UK (the sector’s trade body) remarked, ”While there have been changes since Carillion six years ago, there clearly has not been enough change.”
If you are an employee who has just been made redundant, please take a read of our helpful guide here.
As ISG enters formal insolvency, stakeholders often face significant uncertainty. Here is a breakdown of the legal framework and what it means for those affected.
Administration is a powerful statutory process governed by the Insolvency Act 1986. It is triggered when a company is insolvent and can no longer meet its debts. An independent Licensed Insolvency Practitioner (IP) is appointed to take control from the directors. A key feature is the statutory moratorium—a legal “shield” that instantly stops all legal actions, such as winding-up petitions or bailiff visits, providing the “breathing space” needed to rescue the business or achieve a better result for creditors than immediate closure.
The law dictates a strict hierarchy for the distribution of funds. Fixed charge holders (typically banks with security over property) are paid first. Once the administrator’s fees are covered, preferential creditors are next; this includes employees (for specific arrears) and HMRC for taxes like VAT and PAYE. Following these are floating charge holders, and finally, unsecured creditors—which include trade suppliers and customers—who are at the back of the queue and frequently receive only a small fraction of their debt.
Entering administration does not mean all jobs are instantly lost. For the first 14 days, the administrator assesses the company’s viability and may make redundancies. If a member of staff is kept on past this 14-day window, the administrator “adopts” their contract, meaning their ongoing wages and rights become a priority expense. Those made redundant can claim for unpaid wages and notice pay via the Redundancy Payments Service if the company has insufficient assets to cover these costs.
Suppliers and customers are generally unsecured creditors. Suppliers should stop granting credit under old agreements and negotiate “pro-forma” (upfront) terms for any new supply to the administrator.
Watch Our Video For Employees of ISG
Written ByRobert Moore
Marketing Manager
Rob has over two decades of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.
Rob is now working with the Board at RMT to develop strategic marketing programmes to support the business plan and drive more company rescues.
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