The UK government's plans to address prison overcrowding have encountered a significant setback with the collapse of ISG, a major construction firm. The company, which held contracts worth £1.65 billion with the Ministry of Justice, has entered administration, potentially derailing efforts to create 20,000 additional prison spaces by the mid-2020s.
ISG's demise marks the most substantial failure in the UK construction sector since Carillion's liquidation in 2018. The company was instrumental in the government's £4 billion prison expansion program, with projects including a new 1,468-capacity facility in Buckinghamshire and a £79 million extension in Dorset.
A government spokesperson stated, "We have implemented our detailed contingency plans and affected departments are working to ensure sites are safe and secure." This response underscores the immediate priority of maintaining stability at ongoing project sites.
The timing of ISG's collapse is particularly challenging for the government, which is grappling with a severe prison overcrowding crisis. In August 2024, the number of available places in men's prisons plummeted to a record low of 83, exacerbated by recent riots that further strained the system.
To alleviate the immediate pressure, authorities released approximately 1,750 prisoners early in September 2024. The government is even considering renting prison spaces from Estonia, highlighting the severity of the situation.
The construction industry's vulnerability to economic fluctuations and material cost increases played a role in ISG's downfall. Zoe Price, the company's CEO, attributed the collapse to "legacy issues relating to large loss-making contracts secured between 2018 and 2020," primarily in residential, logistics, and data center projects.
Of ISG's 2,400 employees, 2,200 have been made redundant, with 200 retained to assist with the company's wind-down. The administration process, overseen by EY, aims to ensure an orderly closure of the business.
This event serves as a stark reminder of the challenges faced by the UK government in its reliance on private contractors for large-scale infrastructure projects. It also highlights the complex interplay between economic factors, long-term planning, and the pressing need for solutions to societal issues such as prison overcrowding.
As the government scrambles to address the immediate impact of ISG's collapse, questions arise about the future of the prison expansion program and its ability to meet the mid-2020s target for additional capacity. The situation underscores the need for robust contingency planning and potentially a reevaluation of how such critical infrastructure projects are managed and delivered in the UK.