A group action is being prepared on behalf of subcontractors in the UK and Australia, arguing that government-backed protections failed to stop money owed to the supply chain being swept into insolvency estates when major contractors collapsed.
The backdrop: ISG and Pindan
ISG Ltd collapsed in 2024, leaving behind debts of around £1.1bn, much of it owed to subcontractors. Some subcontractors working on Ministry of Justice prison projects say they expected protection under project bank accounts (PBAs) but still went unpaid after ISG’s administration. They claim the money they were due was pulled into the company’s insolvency estate under UK law. A similar story played out in Australia when construction giant Pindan went under in 2021, leaving creditors out of pocket.
What is a PBA?
PBAs are designed to make sure subcontractors get paid on time. Instead of the main contractor holding all the money, the client pays into a separate account that releases funds directly to subcontractors.
On paper, this should prevent delays and give the supply chain more security. But there’s a catch: PBAs only protect money that’s already in the account. If the contractor collapses before funds are transferred in, insolvency law takes over, and any unpaid amounts can still end up with administrators rather than the people who carried out the work.
PBAs: what subcontractors were promised vs what happened
PBAs were introduced on public projects to give subcontractors confidence they’d be paid. Government guidance suggested they would ring-fence payments and protect subcontractors if things went wrong. Critics of the current system say, in the ISG case, that promise did not live up to the reality.
As Louise Stewart of construction fintech ProjectPay puts it: “Subcontractors were promised protection that simply did not exist. PBAs only protect money already in the account. They fail to stop subcontractor payments being captured by insolvency administrators. Small businesses, families and taxpayers have all been let down and misled.”
This mismatch between promise and reality is at the heart of the class action. Subcontractors argue they were misled into thinking their payments were safe, when in fact the system gave them little real protection.
What the class action is aiming for
Those behind the claim are asking for:
- Accountability: They claim that government-endorsed protections were over-sold or ineffective when tested by major failures. They want to hold both governments accountable for allegedly misleading subcontractors.
- Compensation: They want redress for subcontractors who remained unpaid despite working under PBA regimes.
- Reform: They are also calling for stronger, US-style safeguards that keep subcontractor funds beyond the reach of an insolvency, or the adoption of alternative platforms that ensure payment security on public jobs.
Industry reports suggest that legal claims are now being put together, with backing from funders and law firms. Who can join will depend on how the cases are set up and what the courts decide about the next steps. We’ll keep you posted as the case develops and share updates on what it could mean for UK subcontractors.
