Contractor for Coventry IKEA project collapses
The contractor's bid for the project was reportedly worth £44 million
Work to turn Coventry’s old IKEA into a cultural venue has stalled after the scheme’s main contractor collapsed, months after councillors signed off on extra money to cover the scheme’s soaring costs.
The news was the latest problem to hit ambitions to turn the seven-storey building into a national collections centre and arts space.
Less than three months ago, ISG was announced as the firm that would repurpose the former furniture store. Its bid for the project was reportedly worth £44 million.
However, the company’s UK operations went into administration on Friday, 20 September, forcing work at the IKEA site to stop.
A Coventry City Council spokesperson said: "We are in contact with our partners on the project and the council is currently considering its options and next steps.
"The extent of any recoverability of additional costs incurred by the city council will be determined by the administration process."
The local authority confirmed ISG had been paid for the value of works to date which represented less than four per cent of the total contract due to work being at an early stage.
News of the company’s collapse has cast uncertainty over the fate of the Croft Road building which bought by the city council in 2021.
Leader of the opposition Conservative group Cllr Gary Ridley told the LDRS: "Given the council’s decision to borrow additional funds for this project just six months ago, the public, will want reassurances the IKEA project is on course for a smooth delivery.
"I’ve asked for an update to ensure this is the case. I’m also seeking guarantees that taxpayers won’t be required to fund yet another bailout.”
In a statement, administrators from EY, formerly Ernst & Young, said ISG’s UK operations had ceased to trade with immediate effect.
It added: "ISG’s UK business has experienced liquidity constraints in recent months. The Directors explored a number of options to secure the future of the business, including a sale of all or part of the Group and refinancing options.
"Despite significant efforts to secure a sale of the group over many months, a deal could not be completed."
Since 2020, Coventry Council has been working with partners including the Arts Council to transform part of the building into a national collections centre.
There are also aims for Coventry University to rent some floorspace and open a public café and gallery and for the building’s lower floors to be rented out.
The council borrowed an undisclosed amount of money to fund the scheme’s construction and other fees in March 2023.
Reports said the sum would have financial implications of £1 million per year, but added businesses cases aimed for the scheme to be ‘cost neutral or better’ for the council.
However, a year later, council reports said more money would be needed to cover rising construction costs.
Officers said higher tender prices were due to market conditions and warned that without extra money the project would have to be scrapped. Councillors voted that the scheme should continue with more funding.