Administrators for ESS Modular, the ISG-owned modular construction firm trading as Extraspace Solutions (UK) Ltd, are seeking court guidance after uncovering issues with a project bank account (PBA) used for four Ministry of Justice prison projects. EY, appointed as administrator, reported that £1.3 million remaining in the PBA is being held in a holding account pending court directions, after concluding the account “does not appear to have operated in accordance with the terms of the PBA.”

The matter raises complex legal questions around the trust’s status, its beneficiaries, ESS Modular’s role, and amounts due to suppliers. EY noted the case intersects trust, construction, and insolvency law, making resolution uncertain without judicial advice. The PBA was intended to ensure timely payments to contractors and supply chain members on HMP Hatfield, HMP Sudbury, HMP Springhill, and HMP Leyhill.

The administrators said the Ministry of Justice had not made the final payment into the PBA before ESS Modular’s collapse due to timing. EY is now assessing entitlements, creditor claims, and a proposed approach to distributions, which may include adjudication once court directions are received.

The collapse has been compounded by delays recovering intercompany debts of £28.2 million from ESS Modular subsidiaries Spatial Initiative Ltd and Extraspace Solutions Ltd. Unsecured creditor claims, primarily from the supply chain, have risen from £70 million to over £80 million and may grow further.

Industry bodies emphasise the case highlights the need for digital, standardised payment systems to replace traditional PBAs. The Cabinet Office withdrew PBA guidelines in July, and oversight has moved to the National Infrastructure and Service Transformation Authority. Legal action from subcontractors over similar PBAs continues to unfold, further underscoring ongoing risks in public-sector modular construction projects.

Explore how legal complexities around PBAs are affecting the modular construction sector.