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ISG chief looks for regional expansion

ISG is targeting more work in the North and the South-west of England as it battles the impact of public sector cuts.

Chief executive David Lawther told Construction News that the contractor was looking to broaden geographically to help it see out the economic storm.

He said: “About 65 per cent of our activity [in the UK] is public sector. It is prisons, education, health, social housing and that is obviously a marketplace that will be affected by Government cuts.

“We’ve indicated that the ­numbers, in terms of volumes, reduced last year and we anticipate continual reduction into the following year.

“In regional construction we are spreading geographically. In the North we’ve had very little coverage coming out of the Birmingham area, primarily being based in Manchester and Leeds, and those are markets that we’re looking to take more from.”

He added that ISG would be looking to increase its volume of work in the South-west having opened an office near Exeter.

Mr Lawther said ISG had a pipeline of retail work with high-street banks such as Lloyds, Barclays and Royal Bank of Scotland, which are all currently at various stages of branch upgrade programmes.

ISG is also working with leading supermarkets Tesco, Asda, Sainsbury’s and Morrisons, which Mr Lawther said were all expansion-minded.

He said: “I see the supermarkets having continual capital spending. Because of their competitive nature, they are looking to continue to bring more square footage into the marketplace.

“We provide small-scale and larger fit-out as well as pure refurb and pure new build. We have the full breadth of those skill sets as well as the ability to deliver major regeneration schemes.”

He added that the retail business was only “firing on two cylinders” and that ISG would be looking to capitalise on growth in the high-street fashion retailers.

“We’ve yet to see the return of high-street fashion. It’s starting. There are various conversations and we are working with customers like Primark but as the economy recovers that stream will come back into swing. There’s potentially significant growth down the road in those areas.”

Mr Lawther said that the company, which fitted out the Eurostar terminal at St Pancras, was also monitoring major rail programmes to see whether there were any opportunities. He said ISG was currently bidding for places on a number of rail infrastructure frameworks.

Margins in the highly competitive London fit-out industry were under pressure, he said, but the sector was showing signs of life.

“We’ll see developers look to complete their projects for delivery into the marketplace for 2012 where they perceive there to be a shortage in good quality stock coming into the marketplace.

“In the recession, there was an immediate cutback in terms of the financial and support service sector. What we’ve started to see over the past 12 months is a return of them into the marketplace to deal with normal wear and tear, technology needing replacement and regeneration.

“People cannot stop spending money indefinitely. They have to return to the table and that’s what we’re starting to see.”

Mr Lawther said that ISG’s overseas businesses - providing commercial fit-out services in Europe and Asia as well as retail in Asia - were having to wait slightly longer for an upturn in work.

But in the long-term, he sees the company’s activity abroad continuing to increase as a percentage of the business. Given ISG’s business model, Mr Lawther said acquisitions were more likely abroad than in the UK, with the company currently in early discussions with overseas firms.