Prison building plan in crisis as £1.6bn contractor collapses

Plans to build 20,000 extra prison spaces to cope with overcrowding have been plunged into doubt following the collapse of a major construction company involved in the project.

ISG, which held government contracts worth billions of pounds, on Friday shut down its UK operations and made 2,200 staff redundant.

The construction services company had an annual turnover of £2.2bn. Its collapse is the biggest failure in the building sector since the liquidation of Carillion in 2018.

ISG is a significant government outsourcer, holding contracts worth a combined £1.65bn from the Ministry of Justice. Many were central to plans to expand the prison estate.

Projects ISG was working on include building a new 1,468-person prison in Buckinghamshire and a £79m extension and refurbishment of a prison in Dorset. The future of this work is now in doubt.

A government spokesman said: “We have implemented our detailed contingency plans and affected departments are working to ensure sites are safe and secure.”

The bankruptcy could not have come at a more difficult time for the Government as it scrambles to contain a national prison overcrowding crisis.

The number of available places in men’s prisons fell to just 83 in August, the lowest number on record, after a summer of riots added even more pressure to a system that was already at breaking point.

Around 1,750 prisoners were released early this month in a bid to free up space and ministers are considering renting spare prison spaces from jails in Estonia to ease overcrowding.

The Ministry of Justice held contracts with ISG worth a combined £1.65bn as of June 26, according to Freedom of Information requests by Construction News.

ISG, the UK’s sixth largest construction company, was one of the companies chosen to deliver new prisons under the Ministry of Justice’s £4bn investment programme to build an extra 20,000 prison places by the mid-2020s.

This included £135m in contracts awarded in March for work on HMP Guys Marsh in Dorset and HMP Liverpool, as well as a £300m contract to build HMP Grendon in Buckinghamshire, which was awarded in January.

ISG in administration

In a late-night email on Thursday, Zoe Price, the ISG chief executive, said the company had filed for administration after attempts to secure a sale or refinance the company fell through and that sites and offices would close immediately.

Ms Price said this was due to “legacy issues relating to the large loss-making contracts secured between 2018 and 2020 (primarily in the residential, logistics & distribution sectors, as well as some data centre projects).”

High inflation in recent years has hit the industry especially hard. Construction contracts run for years, so a run-up in material costs can quickly make some projects unprofitable.

EY took control of the company as administrators on Friday. Of ISG’s total 2,400 staff, 200 will be initially retained to help the winding down of the business.

In a statement, EY said: “We wish to be clear to employees, suppliers and customers that it was not possible to conclude a sale as the potential purchaser could not, despite repeated requests of them to do so, adequately demonstrate that they had the funding needed to recapitalise the business and keep it solvent.”

ISG and the Ministry of Justice were contacted for comment.