The construction industry is in the spotlight at the moment with the headline news of the collapse of ISG. It will have an immediate impact on dozens of projects, subcontractors, suppliers, and more. As a top provider of residential architecture in London, we want to have a closer look at the situation and the voices calling for change.

Failure

ISG was recently ranked as the 6th biggest construction company in the UK. They had a huge 57 projects in progress on different sites. A handful were close to completion. In addition, they had 33 more in the pipeline. Their turnover was an impressive £2.2bn. However, all projects came to a halt on 20th September with the company entering administration.

The immediate question is how such a large company has been able to collapse. It isn’t the first time either. In 2017, the 2nd largest UK construction company, Carillion, had serious financial difficulties. They would end in liquidation in January 2018, causing a huge fallout. There was hope we’d had reforms since then, but issues still remain for the story to repeat itself.

A core issue

Looking back at Carillion, one issue was that the construction industry works on fine margins. In fact, reports into the situation said the UK Government had to accept some blame because of the tendency to accept the lowest price for projects. Delays to a surprisingly small number of projects put companies at risk in this situation. That is what has happened with ISG. Delays on two major projects meant they could not pay suppliers and remain solvent.

The loudest call now is for a massive change in the construction industry to help businesses survive. Crucially, is a need to move away from low-balling. Companies shouldn’t be trying to operate with the barest of margins. As an award winning provider of residential architecture in London, we understand this needs to change.

Another thing that needs reform is the use of dysfunctional long term fixed contracts. They are incredibly problematic. What happens is they mean companies have to work with prices they specify for materials when bidding. However, inflation can mean the costs increase with no more money from the client. It means the margin can shrink more by the time a project actually begins.

What next?

The outlook is negative at the moment, and experts are saying there will be months of disruption. But the situation does not seem as bad as with Carillion. It will be challenging, especially for contractors and suppliers. However, some are saying there is actually an opportunity here. Agile companies will be able to step in and take over projects. They could also give support to contractors and suppliers.

It will be stressful for projects ISG have contracts for that have yet to begin. Many of them will need to be retendered. While it does mean they can go to other companies who can deliver them, it means the timelines for many will face disruption. There could be issues with any that have a small window for planning permission too.

Talk to us about residential architecture in London

Coffey Architects is a team you can rely on to design amazing buildings. We have experience in various sectors, including education, offices, and more. Homes and housing is a particular area we love, designing properties people will love. Whatever the project, we can deliver creative designs and more.

So, if you want to design any kind of residential architecture in London, contact us. It’d be our pleasure to help you create sustainable, high quality homes.