The government's champion for modern methods of construction (MMC) has admitted that Legal & General's plan to halt production at its offsite factory is a "real blow" for the modular housing market and a "sobering reality check".
L&G announced yesterday that it was halting production of new modular homes at its giant factory in Yorkshire, with the majority of its 475 staff at risk of redundancy.
As recently as December last year, L&G Modular had announced a 1,000-home deal with Vivid. It has also sold homes to Yorkshire Housing.
Mark Farmer, who was appointed the government's MMC champion in 2019, said: "This is clearly a real blow for the modular housing market and underlines the sizeable difficulties for new businesses of this kind reaching maturity."
L&G had racked up significant losses since its launch in 2017 and only recorded its first revenue in its last reported full year. It admitted it had been unable to secure a big enough pipeline of work to sustain the business.
The news has led to renewed fears over whether modular can become a mainstream option to help tackle the UK's housing crisis.
L&G Modular's apparent failure comes a year after the collapse of House by Urban Splash, a modular housing joint venture between the Manchester developer Urban Splash, Japan's Sekisui House and Homes England.
Mr Farmer said there was still an "important need for lessons to be learned from the growing pains and failures" in the modular space.
He said volumetric modular housing, where homes are assembled entirely off-site in a factory, is "the most challenging to get right".
Last month, TopHat, the Goldman Sachs-backed modular specialist, revealed it had secured an extra £70m in investment, with £25m of this coming from Persimmon, the FTSE100 house builder.
Mr Farmer added that the L&G news was a "sobering reality check that innovation is high risk" and "real evidence that the industry's transition path will be complex and will have winners and losers along the way".
But he said: "Despite this setback, it is evident that there is increasing take-up of other forms of 'hybrid' MMC by house builders and contractors as they face labour shortages and regulatory changes."
Steve Cole, director of Make UK Modular, the trade body of which L&G is a founding member, said: "It is disappointing to see L&G pulling out of modular in an extremely difficult housing market for all builders."
But he added: "It is important to remember that, in the midst of a national housing crisis, fraught with planning difficulties and a chronic labour shortage in the construction sector, modular housing will continue to play a major role in the delivery of high-quality, green homes which are significantly cheaper to heat and run than traditionally built housing.
"Make UK Modular is confident that the modular sector will continue its current total growth trend and remain on track to deliver 30,000 new modular homes a year by 2030."
A number of staff at L&G Modular took to LinkedIn yesterday to say they were looking for new roles.
Source: https://www.insidehousing.co.uk/
