Former staff at failed contractor ISG have told the Enquirer that problems at the £2.2bn turnover business began to emerge nearly two years ago.
Some angry staff now want to see a formal investigation of the owners and the current and previous board as public project disruption and staff compensation for lack of consultation threatens to cost the tax payer.
Insiders blamed management’s failure to deal with legacy and ongoing problem contracts. This began to stack-up problems for the business as other events later took their toll.
Others said an atmosphere developed where people were fearful of challenging optimistic positions taken on project accounts.
One former staffer said: “Management lacked the courage to acknowledge errors or invest in solutions, simply hoping people on site and accounts could magically fix it somehow. Just make it so.”
Another said it became increasingly difficult to finish delayed schemes, with clients taking LADS and squeezing cash flow further.
Staff told the Enquirer that senior management seemed to become increasingly detached from what was happening on the ground. They also bitterly complain that they were kept in the dark about the dire state of the firm’s finances all the way to the end.
It has emerged that to cope with the cash squeeze senior management allocated monthly sums to the construction, fitout and engineering divisions. Commercial teams were then left to allocate what limited funds they had as best they could.
One insider said: “We were in a terrible position with subcontractors desperately pleading to get paid. Firms that issued seven-day notices got prioritised.”
A subcontractor trying to settle his account confirmed that this initial brinkmanship finally descended into the absurd.
He said: “At one point my ISG project contact said put in a seven day notice, it’s the only way you are going to get paid.
“Even then the overdue payment kept missing the cheque run.”
It has also emerged that ISG’s payment practices in effect gamed Government fair payment reporting tables.
Present published payment records ranked ISG as among the industry’s very best payers when in reality subcontractors owed large amounts were battling to get paid.
An ISG insider said: “We paid anything under £25,000 straightaway. Anything above had to be manually highlighted and labouriously authorised at a higher level.
“Cash flow management became the thing that everybody had to do that day.”
Government payment reporting
Quick payment of lower value invoices can mask slower payment of bigger sums to subcontractors highlighting a flaw in the Government’s payment reporting rules which only measure the number, not value of invoices paid.
The most recent entry for ISG Construction puts average time taken to pay invoices at 17 days in the six months to June 2024.
But an accepted standard accounting ratio, ‘creditor days’ taken from the last published ISG accounts, showed it took ISG 51 days to pay the supply chain on average in 2022, up from 38 in 2021.
Morgan Sindall, which has similar fit-out and construction activities making it comparable, at that time improved creditor days to 19 from 20.
Cancellation of large ‘hyperscale’ contracts at advanced preconstruction stages for clients like Hollywood’s Sunset Studios and BritishVolt when the contractor was gearing to start works impacted costs further.
Senior management attempted to control overheads and costs with two waves of redundancies, the first over 18 months ago and the second around Christmas 2023. But this worsened problems claim staff.
One said: “We lost a lot of experienced people some who had been at the business for 20 years and this just made things more difficult.
“Staff travel was and has been banned since then, increasing inefficiency. Training was also cut. All but the most exceptional hiring activity was frozen for months, further starving projects – old and new – from much-needed staff.
“A lot of little things started to come to a head around that time and a new board team was appointed saying they had a plan to resolve our problems.”
Initially staff said they were reassured by management that ISG could trade out of its difficulties, later they were told that the US owners Cathexis would bail the business out with a cash injection.
Finally in July there was the statement from the board that a deal was imminent with a mystery buyer who would save the business with a big cash injection. But talks halted in September with both sides disagreeing about why a deal could failed to be secured.
One ex-staffer said: “We were told it was the fault of the potential buyers that the deal fell through and that the board were left with no option but to file for administration.
“Even now, in their speeches, there is little or no remorse. No gratitude for the service, dedication, and sacrifice of so many. No remorse for the disruption of livelihoods, businesses and families yet to come in our affected supply chain. Not to mention the burden on tax payer and impact on the economy.
“The government should be able to launch an investigation into the actions of the investors and the board over the last two years.
“This cannot be just the result of a failed sale, subbies’ stories testify this was a crisis long in the making,”
