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One of the country’s largest construction companies has gone bust – pausing the Labour Government’s urgent plans to build and refurbish prisons and replace school buildings.
The ISG Group, which employed 2200 people, went into administration just before the Labour Party conference where both Keir Starmer and Angela Rayner pledged to “rebuild Britain”.
The collapse of ISG, the sixth largest building form in the UK, is the biggest firm to go bust since the construction company Carillion went into receivership in 2018. This led to delays in building two new NHS hospitals- the Midland Metropolitan Hospital in Smethwick which opens next week six years late– and the Royal Liverpool Hospital which opened in 2022.
ISG had £4.3 billion of contracts in the pipeline. Some £2.5 billion is work-in-progress and it had signed contracts for another £1.7 billion.
Work has stopped at all the sites which include commercial and office developments, private house building, laboratories, data centres, as well as government projects.
Government projects total over £1 billion with the Ministry of Justice the worst affected. It confirmed that 24 projects in the prison service had been halted and two schemes involving new courts were also affected.
It declined to name the projects but confirmed that three major projects – which have been named in the construction press – have been stopped until the ministry can find a new contractor.
These include a new £300 million prison at Grendon Underwood in Buckinghamshire to house nearly 1500 prisoners which the last government agreed to go ahead in January. This scheme was opposed by the Conservative-controlled Buckinghamshire Council but was overruled by the Planning Inspectorate.
Two of the other big projects include the refurbishment of Liverpool Prison and extensions to Guys Marsh prison in Dorset. These were agreed last September under the previous government and are worth £135 million.
The collapse coincided with Starmer having to release thousands of prisoners early because of overcrowding which was starting to delay criminal trials because they had no place to house convicts.
The Department for Education was also hit as it has £190 million of contracts with ISG. The ministry declined to name any of the sites for “commercial confidentiality” reasons.
However, Schools Week identified 14 contracts worth £60 million which have been paused. These include a £7.5 million extension to Millbay Academy in Plymouth which will house 10 classrooms, a new reception area, staffroom and prep area.
Another is a £22 million remodelling of a special school at Woodlands Meed, an all-through special school in West Sussex, that had just entered its second phase when headteacher Adam Rowland learned of the company’s collapse.
The first phase – a new school on its former playing field – is complete, so the pupils are in their new facilities. But the school is next to a building site, where its former buildings are due to be demolished to make room for car parking and a new sports pitch.
Other schools affected include Hempland Primary School in York, part of the Pathfinder Multi-Academy Trust and Matford Brook Academy, a new all-through school in Exeter.
The latter school was already delayed – it was due to open last September – with pupils still in temporary buildings.
The collapse has also hit universities. One of the biggest projects is a £200 million new building for the Institute of Neurology at University College, London. The institute is part of the Faculty of Brain Sciences and is considered the leading centre in Europe. The building has just been topped out.
The ramifications of the collapse of ISG are not clear as many subcontractors were working for the firm and there is a worry it could trigger more collapses in the industry.
During the Labour conference last week two modular building firms connected to ISG and based in Hull went into liquidation, losing another 100 jobs. One had a contract with the Defence Infrastructure Organisation to build new accommodation for the army over the next six years.
The collapse of the ISG and its subsidiaries has been blamed on legacy contracts between 2018 and 2020.
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EY, administrators of ISG, said: “ISG’s UK business has experienced liquidity constraints in recent months. The directors explored a number of options to secure the future of the business, including a sale of all or part of the group and refinancing options.
“Despite significant efforts to secure a sale of the group over many months, a deal could not be completed.”
Spokesmen for both the Ministry of Justice and the Department for Education said: “We have implemented our detailed contingency plans and affected departments are working to ensure sites are safe and secure.” Both ministries insisted they had robust plans to deal with the issue. They have to find new contractors to finish the work.