Exclusive: ISG collapse risks £1.84bn of government contracts

The contractor ISG had secured over £1.84 billion in government contracts prior to its failure, creating significant challenges for the prison construction initiative, according to Construction News.

The chief executive confirmed in an email to employees and suppliers last night that the UK's sixth-largest contractor is about to enter administration. This follows the announcement from CN that six of its subsidiaries have already filed for administration.

Requests for Freedom of Information made by CN reveal that a significant portion of ISG's government contracts originated from the Ministry of Justice (MoJ), with the company holding contracts worth £1.65 billion as of June 26. This was just a week before chair Matt Roche informed employees and suppliers that the company was "very close" to being sold.

A spokesperson for the government stated, "We've put our comprehensive backup plans into action, and the relevant departments are actively working to make sure that the locations are safe and secure."

ISG received numerous prestigious contracts for prison projects. Despite ongoing speculation regarding its financial situation, the Ministry of Justice kept awarding the company prison-related work, including a £300 million project at HMP Grendon in January.

Contracts for HMP Guys Marsh, valued at £79 million, and HMP Liverpool, worth £56 million, were finalized in March.

ISG was one of four collaborators in the Ministry of Justice's groundbreaking £1 billion prison construction initiative. They teamed up with Kier, Laing O’Rourke, and Wates to establish four facilities for male inmates.

CN is aware that the government is considering the option of having another contractor from the alliance take over the tasks previously assigned to ISG.

CN also disclosed that the Ministry of Justice disbursed £145.9 million to ISG, which is its second-largest supplier, during the most recent financial year.

As of June, the Department for Education (DfE) had ongoing agreements with the company amounting to £190.5 million.

ISG secured multiple school construction projects worth millions after winning eight regional contracts as part of a four-year, £7 billion Department for Education framework in 2022.

Out of the total of £190.5 million, over £101.3 million was associated with projects that are currently in the primary construction stage. Approximately £80.5 million pertained to projects that were in the defects liability period, while £8.7 million was invested in the preconstruction stage.

CN is aware that the DfE is collaborating with the schools impacted to explore different options for carrying out projects, and they will seek various forms of compensation to help reduce extra expenses.

The Department for Health and Social Care, the Defence Infrastructure Organisation, and the Welsh Government informed CN that they currently have no active contracts with ISG.

The Ministry of Justice has been reached out to for a response.

Earlier today, CN announced that a dispute has erupted between the contractor and the company that was in talks to purchase ISG regarding the failed deal.