David Johnson, pre-construction director at Volumetric Building Companies, shares his thoughts on why the demand for modular continues to increase and the urgent need for change
There is a complete disconnect in the UK modular construction sector currently. There are high-profile modular manufacturers in the single-family housing space going out of business – a tragedy for everyone affected – and other major modular manufacturers with strong financial backing that are flourishing and expanding in sectors such as hotels, residential, education and healthcare.
Underlying all of this is a need for industrialised construction that has never been greater.
Why the demand for modular continues to rise
There are now multiple government programmes and frameworks promoting modular construction – from schools and healthcare to prisons and defence.
There is the much-quoted 300,000 homes a year shortfall in new housing and the well-publicised but still serious shortage in skilled construction labour, especially post-Brexit and across the South East.
With a general election a distinct possibility in the next 12 months, there will be an inevitable impact on construction. Manifesto pledges, for example, of a commitment to affordable housing are likely. This is so urgently needed to help address the national housing crisis.
In summary, the UK desperately needs MMC and offsite manufactured solutions. But the serious reality is that if you aggregate demand across all sectors, there is nowhere near enough UK modular manufacturing capacity to meet both current and increasing demand.
VBC’s approach is diversification – and perhaps one of the reasons for the failure of modular housebuilders like Ilke Homes and L&G was a focus on one single sector – single-family housing.
Combine that factor with the lack of a guaranteed pipeline, a cumbersome and protracted planning system, and the requirement for standardisation to make modular work (which often conflicts with local planning requirements), and it is easy to see why these potentially great businesses have tragically failed.
And there are other issues:
- Modular must be affordable, for which it needs wider adoption.
- The cost of borrowing continues to rise, causing developers and investors to reappraise their financial models – whether built using traditional or MMC.
- There is tension between the drive for more sustainable solutions, such as timber, and issues around compliance, fire regulations and the need to convince investors.
- There are regional challenges, with targets for localised spend on buildings and homes as part of the levelling up agenda, which conflict with the need for major national offsite manufacturing centres.
- Manufacturing in any sector always has to be pipeline-driven to stimulate investment in new factory facilities – from cars, solar panels and batteries to modular buildings
- There is clearly no single solution that will address all of these challenges and there are pros and cons of any approach. However, in our view, the direction of travel could be with three potential options.
1. Hybrid construction
We are seeing a move towards more hybrid solutions, which will engage different aspects of MMC to create a single building.
For example, you can construct a podium to accommodate large open plan spaces (such as amenity areas) using CLT and then install lightweight volumetric modules above in light gauge steel or timber, which are fully fitted out offsite.
The use of timber is certainly going to increase in line with the government’s aggressive sustainability agenda.
2. Platform approach
A platform solution – such as that developed by the Seismic consortium – can be used by multiple (smaller) manufacturers – and there are now a considerable number of Tier 2 modular manufacturers with sub £20m turnover.
There is a management headache and potentially larger risk profile from taking such a granular approach. And if you aggregate ALL the capacity of these Tier 2 manufacturers, there is nowhere near enough to meet the needs of all the sectors that have a reliance on modular – education, healthcare, prisons, defence, emergency housing and affordable housing.
3. Large global manufacturers to deliver volume
A platform approach can be delivered by larger global manufacturers with the added benefit of strong financial backing and a proven track record outside the UK.
These specialists can deliver the volume urgently needed in the UK but to encourage investment in UK factories, there has to be a visible and accessible pipeline. That could be achieved by aggregating demand across local authorities for mid to high-rise housing or, more radically, by aggregating pipelines across multiple sectors.
Government and construction clients should be engaging with these manufacturers to understand what we all need to support the demand for modular and commit to the level of standardisation required to make industrialised manufacturing viable.
Innovation in procurement is as important as technical innovation
To support these potential solutions, there must also be a move away from the traditional, outdated contracting/construction ethos for these types of projects. Innovation in procurement is arguably as important as technical product innovation.
For any of these options to work, there has to be a significant change of mindset and approach on the part of building users, construction clients and the government.
Traditional construction procurement simply does not work for modular.
Why the new offsite integrator role is a welcome move
We strongly welcome the introduction of new Offsite Project Integrator roles on a number of key government frameworks. This recognises that MMC companies are great at manufacturing but less so at taking on other contractor roles – such as groundworks.
If used correctly, these frameworks will promote a move away from modular companies doing everything themselves, reducing risk and cost for the client.
Frameworks, such as in healthcare and education, have previously forced MMC companies to take on this additional risk and scope that they are less comfortable with.
The alternative is probably worse with traditional main contractors treating modular specialists like subcontractors, which adds another layer of management cost and removes the early MMC engagement, innovation and collaboration needed from the outset for a truly successful and efficient modular project.
The offsite integrator function on the new frameworks could allow consultants with specific modular expertise, like Turner & Townsend and Arcadis, to provide what is, in essence, a management contractor role to manage risk and the interface between the different specialists.
There is a clear need to integrate offsite manufacturing into the broader construction offering in the UK. The fact that this has now been recognised by key government frameworks is a really great move and we strongly support it.
The importance of great design
As a sector, we still have work to do to change perceptions that industrialised volumetric manufacturing should not compromise design.
There are great examples of excellence in design in modular in the UK and globally. Architects such as HTA have created fantastic architecture for modular schemes developed by Tide and others, and there are multiple examples of outstanding modular buildings in healthcare and education.
VBC places great importance on a design-led approach and has a 50-strong design and engineering team that has produced award-winning residential architecture, delivered using highly efficient modular solutions.
The envelope aesthetic should be separate from the pre-manufactured components for the building structure and internal space. If the façade is unitised, for example, the appearance is not constrained by expressing the module joints.
And a modular structure should be capable of supporting any aesthetic for a structural façade. It all starts with taking a design-led approach with earlier MMC contractor engagement and integration of the whole offsite manufacturing supply chain.
In summary, there is instability and a high level of insolvency across UK construction and a need for change. But that does not mean all contractors and subcontractors are going out of business!
Let’s take a balanced view and continue to encourage growth, pipeline, standardisation and design excellence in MMC. Then we can keep evolving and innovating to meet demand. The UK modular sector certainly has a lot to celebrate.
David Johnson
Pre-construction director
Volumetric Building Companies
