MoJ owes us £20m after contractor collapse, say suppliers

Tens of millions of pounds owed to suppliers who worked on upgrades to three prisons in England are being investigated by the government. At least 40 businesses are thought to have owe the money for jobs they carried out in Birmingham, Liverpool, and Dorset before lead contractor ISG took over in September. The small and medium-sized businesses claim to have been covered because the Ministry of Justice (MoJ) promised to fund the schemes through ring-fenced Project Bank Accounts (PBAs). However, some businesses are now in bankruptcy, while others are planning to sue ministers. The MoJ declined to comment.

After the demise of Wolverhampton-based Carillion's 2018 demise, which resulted in major job losses and a halt to several building projects, P They are designed to protect smaller businesses by holding payments in designated accounts that can only be used to pay them. However, two firms working on a HMP Birmingham renovation have told the BBC that the PBAs were "not worth the paper on which they were based. Hundreds of thousands of pounds in the two months leading up to ISG's demise. Hundreds of other companies in Dorset are likely to be in similar situations, with HMP Liverpool and HMP Guys Marsh in Dorchester as a result of the upgrade. The total amount they owe is estimated to be about £20 million.

European Scrameeding, a Lancashire-based company, worked on the flooring of refurbished cells from the early 2024. Dan Henshaw, the company's sales manager, said they didn't get paid until August 2024, but it was now owed for a month's service, which was worth about £130,000. It was a massive blow when their gross revenues were usually around £300,000. It's had a huge impact, he said. We've got overheads and employees' wages to pay.We're still feeling the consequences now, and it's had a huge effect on cash flow. "We've managed to remain afloat because we're a small company, but we don't walk away with net loss every year.

Mark Crumbie is now semi-retired, but he was previously employed in Leicester to run Raven Project Metals. HMP Birmingham's walkways were his longest job ever, and the 64-year-old hoped it would be his swansong. However, he said his former employer owes nearly £185,000 for about two months of work, despite the fact that the entire company was still expected to make £75,000 in gross income from the entire job. Mr Crumbie said he was very sorry not to have been given the PBAs. We were very sure the money was safe, he said.

It was to prevent another Carillion-type situation where a main contractor goes bust and kills everyone else involved,

says the author, "but that's just what's going to be.

PBAs should be distributed almost immediately to suppliers. However, EY-Parthenon, the accounts had nominal funds in them when thEY were first created, according to the administrators. It means that the money was probably never paid into by the MoJ, with Iain McIlwee of Finishes & Interiors (FIS), who referred to the situation as a

mystery. It was having a huge effect on small business owners, with some facing bankruptcy and others dealing with

serious emotional strain and heartache.

They're trying to get back what they should have been paid 12 months ago,

the narrator said. "Companies are people, and these are people in danger who need our government's help.

FIS is assisting some of the firms that owe money and assisting in the coordination of legal proceedings with law firm Hill Dickinson. Sarah Emerson, a partner at Hill Dickinson, confirmed that they were involved in pre-action correspondence with the MoJ on behalf of seven companies that worked on the projects. She said that her clients were small businesses who were let down and that they were unable to figure out what had happened to the money they owed.

They were told this was a good thing because [PBAs] would shield them from an insolvency case,

she said.

They're set up as a trust mechanism, which means that funds are ring-fenced.

That means money in those Project Bank Accounts legally belongs to those that are due to be paid.

Despite describing them as a

pioneering new way of paying supply chain members in construction,

the Cabinet Office rew its advice on PBAs in July. The BBC asked why this happened and when new guidance might have been released, but there hasn't been a response. According to a MoJ spokesperson, they were unable to comment due to pending legal proceedings.

Joint administrators were appointed by the High Court of Justice to eight companies within the ISG Group on September 20, 2024,

EY-Parthenon's spokesperson said.

The administrators are officers of the court and act in the interests of all creditors of the companies.

The Project Bank Accounts (PBAs) had no funds in them when they were first established, and allegations that funds were moved into ISG's insolvency estate are inaccurate.

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