Calls for audit reform grow after ISG found to owe £1bn

Construction giant ISG collapsed with debts over a billion pounds, newly published filings have shown, prompting fresh calls for audit reform.

ISG, which specialised in delivering government contracts projects like London’s velodrome, went bust in September after attempts to secure a rescue deal failed.

The demise of ISG was the largest and most significant collapse in the sector since the failure of Carillion, which went under in 2018 with arrears totalling £7bn.

Now, estimates made by company directors filed on Companies House show that ISG collapsed under debts of £981m. It also hadn’t fulfilled public sector contracts to build schools and prisons that were worth north of £1bn.

The revelations have given rise to fresh calls for reforms to be made to the UK’s accounting sector, after internal auditors failed sufficiently to flag up the financial difficulties under which ISG was buckling.

Labour MP Liam Byrne, chair of the business select committee, told The Sunday Times that ISG’s collapse provided “fresh evidence for why urgent reform of the British audit industry is now so essential”.

“Our committee will want to make sure the new Audit Reform and Corporate Governance Bill is fit for purpose, and that means learning the lessons from the shambles of ISG’s demise,” he added.

There is no suggestion the construction giant failed to satisfy any auditing requirements, and its administrators have not claimed that the internal audit arrangements of the firm, which is owned by US firm Cathexis, were not up to standard.

ISG was audited externally by MHA, and EY was appointed as its administrator.

EY was contacted for comment.