Intro
On the longest day of 2023, KOPE will participate on a panel at the NXT DEV conference in London. The subject of the panel will be "how much are we learning from prefabrication failures?". Given the recent press in the UK's modular sector, it is certainly a subject that warrants exploration.
KOPE runs the MMC Market (in partnership with Cast Consultancy) and the North America-focused Offsite Market: two of the largest free and open databases of offsite construction. With the data these sites provide, we are granted a rare level of insight into the UK's and the USA's MMC markets.
Superficially there has been much doom and gloom about the sector in the press, following the collapse of several high-profile modular operations. However, we at KOPE believe reports of the death of modular have been greatly exaggerated; it's not all bad news (and we do have a cultural tendency to lean towards a miserable outlook in the UK media).
However, it’s worth putting this in context. Currently, around 300-400 construction companies of all types are going under every month, according to numbers from Noble Francis, Economics Director of Construction Products Association. This is expected from an industry in a state of perpetual crisis.
Is it all modular?
In press reporting, there is a noticeable over-celebration of volumetric modular companies over other forms of prefabrication. If a panel-based or component manufacturing firm goes under, the chances are you won't hear about it. Modular gets the most attention post-mortem. Partly, that's because the underlying vision of modular inspires a lot of hope; it is the most visionary construction solution so this is understandable.
Staying with this narrative, let's focus on the modular firms which have been gaining so much attention. Recent modular businesses that went under were all comparatively young operations: Swan NU Living (founded in 2020), Legal and General Modular Homes (2016) and House by Urban Splash (2019). Caledonian Modular was saved when it was bought out by the JRL Group. We can add to this the new troubles being faced by ilke Homes (founded 2018).
However, we can't label a firm a "failure" in such a simplistic manner. There is so much that these firms in question did right. Firstly, they've done a lot to inspire the industry and progress the conversation towards MMC. In an industry that is so risk averse, that's a huge achievement.
Swan NU Living was highly ambitious, with CLT-based homes that were custom configured via a web app, demonstrating an incredible level of ambition. House by Urban Spash was also configurable and it created some iconic developments in the centre of Manchester - no mean feat.
It is yet to be determined what happens to ilke Homes. They appear to have solved one of the hardest problems - getting enough demand to keep the factory full - with a gigantic pipeline of over 4000 homes. After many years of research and development, they launched the ilke Zero concept, guaranteeing a zero carbon home, with no energy bills all at no extra cost to the buyer. This forward-thinking product launched just months before the war in Ukraine sparked an energy crisis. The firm may yet be bought out and survive.
In the UK what we're seeing a lot in the press is a wave of primarily financial failures, failing to really get a financially sustainable business model established. That news isn't about failures 10 or 20 years into running a mature and stable operation (those would be different challenges, like new legislation, change of business model, ownership etc).
Despite recent news, it's worth noting that the UK is home to some very old and stable modular firms, such as: Algeco/Elliott Group (founded in 1955), Premier Modular (1956), Portakabin (1961), Hadley Group (1964), Actiform (1984), ESS Modular (1989), Rollalong (1998) and the Thurston Group (1970). Many of these are firms that have transitioned into the modular sector, having previously manufactured site accommodation and portable buildings. Others, such as British Offsite, have slowly worked their way up to full volumetric modular offerings having originally offered 2D component products.
If any one lesson can be learnt from the recent collapses, it would be: "don't try to do too much alone, too fast". Our industry has seen many challenging years recently and (understandably) high-risk moonshot operations have not fared too well. In better times many of these firms might have thrived and developed an established position.
Here's the good news
But there is good news, too. Of the UK's modular firms, one outlier seems to have cracked the code. Vision Modular develops schemes that are entirely modular, building hundreds of units where there is stable demand, in some of the world's tallest modular towers. But they don't work alone - Vision spreads the risk by working within the same successful team of HTA Design, Tide Construction and Century Facades. It seems to work - Vision saw pre-tax profits of £5.2m and £6.9m in recent years. Read a great analysis piece here.
All the while, government support for MMC has been strong - bodies like DLUHC and Homes England have constantly engaged with our sector to help establish common industry definitions, provide financial incentives and help establish credibility for the sector. Just last month, DLUHC launched a research project (lead by consultants Akerlof) to create a Kit of Parts for housing in the UK, helping to de-risk the sector and make it more attractive to new entrants.
Another key reason to be hopeful for MMC is that Plan A (traditional labour-based approaches) is simply going out of the window, both in the UK and USA. The demographic timebomb on which construction sits cannot be addressed, as every passing year we lose thousands of our most experienced builders to retirement. Without builders, there simply isn't any traditional construction: industrialised construction is the only way forward and that embodied both a positive and necessary change.
In conclusion
MMC has already begun to appear across the UK's construction sites (and it’s not all modular). Technologies that were once experimental are now commonplace: bathroom pods, wall cassettes, ready-made stairs and trusses and pre-assembled M&E assemblies. Despite its many challenges, heavy timber is also gaining traction across the country. We're seeing a heightened level of maturity with the original generation of industrialised products, such as doors, windows, lifts and facade systems.
Over time, we're witnessing many new construction technologies gradually finding their natural place and establishing themselves as successful business. The MMC Market lists nearly 300 suppliers of industrialised construction systems across all 7 MMC categories (doubtless there are many more) so don't believe the hype that the world of industrialised construction is doomed forever.
And if you're in the business of offsite construction, be sure to register for a free account on MMC Market which will increase your visibility in the growing world of MMC.
