Co-ordinator of actions says reform needed to protect payments for work already completed
A class action lawsuit is being prepared against the British government over the alleged failure of project bank accounts to protect payments to subcontractors after the collapse of ISG.
ISG went into administration last September with more than £1.1bn in unpaid debts. These included unmade payments to specialist subcontractors on Ministry of Justice prison projects.
Despite these schemes using public bank accounts, money owed to subcontractors was allegedly diverted into ISG’s insolvency estate due to UK insolvency laws.
The class action is being co-ordinated by the Finishes and Interiors Sector, which says it believes around 40 contractors have been impacted. Lawyers Hill Dickinson are representing the group.
As well as securing compensation, those involved in the action are pushing for more meaningful protections for subcontractor payments, pointing to the US as an effective model.
Iain McIlwee, chief executive of the Finishes and Interiors Sector, said: “For too long, subcontractors have been picking up the tab for the failings of others. We had Carillion and nothing happened.
“The numbers associated with ISG are again eye watering but between these two there have been numerous failings that have felt like death by a thousand cuts to the supply chain.
>> See also: Downfall of ISG: how and why it collapsed
“It is not right that hard working specialists find themselves at the back of the queue when contractors collapse, shouldering far more than their share of the burden for poor procurement, contract administration and at times questionable business practices.
“The ISG case shows that we urgently need reforms that provide genuine protection so that small businesses are not carrying the cost of systemic failure.”
Earlier this month, ISG administrator Ernst & Young said it was extending the administration by a year.
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