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A former ISG employee has given a damning assessment of the industry鈥檚 鈥渂roken economic model鈥� as the head of trade body Build UK said construction had to do things differently in the wake of the firm鈥檚 collapse last week.

The firm鈥檚 administration, confirmed on Friday after days of rumours it was set to go under, is the biggest since Carillion sank in 2018. Around 200 people have been kept on by administrator EY to help out with the administration after 2,200 people lost their jobs the same day.

Dozens of industry professionals have taken to LinkedIn to say the current contracting model is broken and needs a complete rethink.

One of those affected ISG employees, its former managing quantity surveyor Josh Griffiths, said: 鈥淲hat has to change [is] the broken economic model that encourages low margin and high risk work, and a perception that this is acceptable because someone will sign a contract saying so.

鈥淭his starts from clients, professional teams and legal advisors promoting a fair and equitable contracting profile: 2% [margin] is not sustainable; 1% contingency is not sustainable, zero weeks programme time risk allowance is not sustainable [and] heavily amended forms of contract are not sustainable.

鈥淣o other industry would launch a development for the same financial risk and reward.鈥�

He said the industry should roll out minimum margins at differing project bands, suggesting a 5% margin was 鈥渘ot unreasonable鈥�, and warned: 鈥淥ur industry needs to adapt or it will fail again and again.鈥�

And Mick Rogers, the director of business development for VolkerFitzpatrick鈥檚 building arm, said: 鈥淸ISG] s the inevitable result of the constant 鈥榬ace to the bottom鈥�. Most clients and their cost advisors say they don鈥檛 do it. Yet every one of us sees it in action every day.

鈥淎 lot of clients don鈥檛 know any better but their cost advisors do. There is no excuse. Stop promoting the race to the bottom. Advise on enabling a fair profit, a fair risk share, and the right price not the lowest price. If you award to the lowest price, you鈥檙e promoting the race to the bottom and contributing to the next contractor failure.

鈥淎nd contractors, stop kidding yourselves you can make a profit when you鈥檝e squeezed the pips out of everything at tender stage.鈥�

Speaking 10 days before ISG sank, Cathal O鈥橰ourke, the boss of the country鈥檚 biggest provate contractor, said current industry margins were 鈥渘ot sustainable鈥� after Laing O鈥橰ourke posted a pre-tax profit of just 拢18m on turnover of 拢4.3bn. He the return 鈥渁cts as a significant handbrake on the sector鈥檚 ability to invest in the transformative technologies that will create step-change鈥�.

Build UK has also said the industry must do things differently in the future to prevent more collapses like ISG鈥檚 in the future.

Suzannah Nichol, the chair of the trade group, which represents contractors, said: 鈥淔or too long, inappropriate transfer of risk and unsustainable profit margins have been accepted as the way to do business, despite the recommendations for more collaborative and sustainable ways of working featured in every report since [the] Latham [report called Constructing the Team and published in 1994].

鈥淲e have to change the way the industry operates in order to prevent more companies ending up in this position, which is distressing for everyone involved.鈥�

She said it has asked specialist contractors to see if they can take on some of the apprentices that have lost their jobs as a result of ISG鈥檚 collapse.

She added: 鈥淲e want to hear from any specialist contractors employing apprentices that may be at risk of losing their job as a result of ISG鈥檚 demise and, also, from any ISG apprentice, graduate or trainee that has been affected.鈥�

鈥淚t鈥檚 important, at this stage, to come together as an industry and do everything that we possibly can to support all those affected.

鈥淭here will be a significant impact on those just starting out on their career in construction, and this is where we are looking to make an immediate impact and are encouraging any businesses to get in touch that may be in a position to help one or more of ISG鈥檚 apprentices, graduates or trainees secure another role in the industry.鈥�

Meanwhile, the Construction Leadership Council said: 鈥淲e would advise everyone in the industry to ensure that they are managing any impact on their businesses within the terms of existing contracts, ensure that where possible payments are made promptly to suppliers.

鈥淔or the apprentices and graduates who are directly employed by ISG, Build UK and the CITB have established a working group to ensure that placements can be found for as many people as possible.鈥�