NEW analysis from Barbour ABI shows the impact of ISG’s collapse has yet to fully impact the UK construction sector.
Contracts awarded for projects increased by 76% to £10.7 billion in September, thanks to two large infrastructure projects in the form of the Hornsea Offshore Wind Farm (£3.6 billion) and the East Birmingham to Solihull Metro Extension (£735 million).
Without these major projects, Barbour ABI said contract awards remain ‘roughly in line’ with previous months.
The industrial sector, where much of ISG’s on-site work resided, saw the largest proportional increase at 289% to £1.2 billion after a dip in recent months. Almost half of this value came from the £500 million Gigafactory in the south west.
However, Barbour ABI sounded a ‘cautious’ note about the future. “Looking forward, there continue to be some key risks to growth in the construction sector; continuing materials price inflation, skills shortages and an ageing demographic of construction workers,” said Barbour ABI head of business and client analytics, Ed Griffiths. “Additionally, construction insolvencies are at their highest level since the financial crisis of 2008. Notably, this month saw Tier 1 contractor ISG fall into administration.
“ISG’s headline-grabbing work on 69 ongoing central government projects is just the tip of the iceberg when you look at the full data set of the company’s contract portfolio. The ripple effect will be extremely worrying for the sector.”
Residential contracts rose 14% in September, alongside a 9% increase in approvals. However, Barbour ABI found new figures released by the government showed the extent of the challenge ahead for meeting housing targets.
“Analysis of the government’s latest housing supply data shows starts in Q2 were down significantly compared to the same period last year, with approximately 23k starts compared to 66k in 2023,” said Griffiths. “Average completions over the past four quarters would add up to around 812k homes over five years should current levels continue. Well short of the 1.5m target set by the government for this parliamentary period.”
Infrastructure saw the largest gain of 136% to £1.7 billion, its highest month since October 2023. Highlights included 700MW and 1000MW battery storage projects in Scotland and the north east respectively.
