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鈥淭here are a load of people right on the cliff edge,鈥� said Jaimie Johnston, head of global systems at Bryden Wood. 鈥淭hey are going 鈥榠t鈥檚 probably deep enough, but do I dare?鈥� And as soon as one person has jumped in and gone, 鈥榶eah, it鈥檚 fine鈥�, a load of people will suddenly rush in.鈥�

Johnston was sitting on a sofa, nestled between other experts, looking out over a congregation of construction enthusiasts at a roomy venue in London鈥檚 Bloomsbury hotel. He was talking about whether offsite construction is ready to take over from traditional, bespoke methods.

鈥淢y guess is once the first few [big success stories] happen in different sectors, and people start to see the benefits, all the dominoes will topple. My guess is it will happen very quickly in three, to five, to seven, to 10 years. If it doesn鈥檛, we have a massive problem.鈥�

I have heard the smaller entities in the construction world say: 鈥楾hat wasn鈥檛 partnership, that was partner-shaft. We got absolutely nailed by the big guys鈥�

Scott Crease, Max Fordham

Nobody vigorously disagreed with Johnston. Mike Pitts, deputy challenge director for transforming construction at UKRI, said the tipping point is around five years away, if UK construction can avoid recession. Amber Beare, technical design lead at Urban Splash, said the industry is in the midst of the change already 鈥� but it is gradual. And Tim Hall, consultant at Total Flow, said the sector is probably close 鈥� he is just praying there are no spectacular failures that knock the industry backwards.

So how, and why, will the offsite revolution happen? How will it affect the size and shape of construction firms? And what 鈥� if any 鈥� role should foreign capital or government policy play?

鈥淲e talk about how it is hard to deliver things on time and on budget, and without a doubt modern methods of construction are an opportunity for us to improve in that area,鈥� said Lara Potter, director of workforce for the future at Arcadis.

Offsite methods are already favoured by developers looking for a speedy build. Rory Bergin, sustainability partner at architect HTA, said: 鈥淏uild to rent is the classic example. You finish the building six months earlier; you get six months more rent. On a substantial building, this is worth millions [of pounds].鈥�

And the speed bonus is more than rent. The cost of borrowing falls if it is over a shorter period, while halving construction time can also free staff to work on other developments. 鈥淲e have designed and built buildings from start to finish 鈥� from first drawing to handover 鈥� in two years,鈥� said Bergin. 鈥淚t鈥檚 not unheard of for it to take two years to get planning.鈥�

But saving cash on offsite construction is more difficult if you cannot monetise hasty construction times. 鈥淚t鈥檚 still the position that most housebuilders don鈥檛 have that business case,鈥� said Joey Gardiner, contributing editor at 好色先生TV. 鈥淭hey build to sell at the rate they can sell, and they can only sell one a week, so they don鈥檛 want speed. The biggest benefit of offsite is not necessarily seen as a benefit by clients.鈥�

Traditional is too slow, offsite construction may be fast but is not producing a product that they want, so they vertically integrate 

Tim Hall, Total Flow

Bringing down cost

There are others reasons why offsite might be better. It could be better for the environment. It could create a safer and more robust product. And it certainly reduces labour needed on site.

But if offsite construction is ever going to become standard, bringing cost down is important.

Scott Crease, senior partner at Max Fordham, said he has seen clients shy away from offsite over cost fears. 鈥淢ost of those projects were at design and build, [RIBA] stage three,鈥� he said. 鈥淎nd actually, it was the risk of not being able to go out to a wide enough base of contractors to get a price they are comfortable with. [In particular] the housing associations and local authorities were very scared of the procurement rules they鈥檝e got to abide by.鈥�

One reason for a relative dearth of independent construction manufacturers is the lack of regular demand: factories run most efficiently when they have stable output. Part of the problem, said Total Flow鈥檚 Hall, is the brutish and transactional nature of construction supply chains.

鈥淭here is an awful lot of terminology used in construction about 鈥榣et鈥檚 have a partnership鈥�,鈥� he said. 鈥淭hen I have heard smaller entities in the construction world say: 鈥楾hat wasn鈥檛 partnership, that was partner-shaft. We got absolutely nailed by the big guys鈥�.鈥�

Contractors are also used to hopping between subcontractors 鈥� and using the threat of walking away to push suppliers on margins. But this has to change, said Hall. 鈥淭oyota doesn鈥檛 change its gearbox suppliers on a weekly basis 鈥� it partners, it learns what makes the other tick, it learns how its behaviour drives cost in the supplier鈥檚 cost base,鈥� he told the audience.

As a result, a lot of developers have chosen to vertically integrate 鈥� buying or building their own factories 鈥� to better manage the relationship between construction demand and manufacturing output. 

Housebuilders鈥� factories

鈥淢ost housebuilders who are using modular on site have their own factories, even if they have not set out to do that, because they cannot get the cost models to work [by other means],鈥� said Beare. Urban Splash itself bought a factory, along with 70 staff and intellectual property for modular systems, from its supplier SIG in 2018.

Owning the supply chain also improves developers鈥� control over their product. 鈥淏uild to rent [developers] have seen a lack of capacity for the kind of houses or apartments they want 鈥� so you get them investing in manufacturing capacity,鈥� said Hall. 鈥淭raditional is too slow, offsite construction may be fast but is not producing a product that they want, so they vertically integrate.鈥�

A shift towards offsite construction methods and developers owning their supply chains has a knock-on effect for contractors. Tier one construction firms might currently be managing 2,000 work packages and 200 subcontractors 鈥� 鈥渂asically, herding cats鈥�, said Hall 鈥� and taking overall responsibility and risk. This all changes if suddenly all that is needed is one firm to do groundworks, another to do MEP and a third to crane in boxes. 

鈥淲e are starting to see a return to the CM model,鈥� said Johnston. 鈥淚nstead of tier ones seeing all the money on their books, they are becoming the integrator and they are becoming the construction manager.鈥�

Pitts challenged UK firms to invest and modernise their methods before foreign firms swoop in for their dinner.  鈥淚f you think you can keep building crappy, boxy homes in the same way, you are wrong. Ikea build factories right now 鈥� I believe [BoKlok, Ikea鈥檚 JV with Skanska] is the most profitable part of Skanska鈥檚 entire operation. Amazon are getting in there 鈥� and these guys know how to deliver stuff for customers.鈥�

Bergin wondered whether imported manufactured goods, or foreign direct investment, could be yet be a game changer 鈥� adding he had seen projects where 鈥淐hinese manufacturers can provide the same thing, for a lower price, and with better quality finishes鈥�. He points out that in Singapore, firms are required to build using offsite construction.

The whole life value of Chinese manufactured goods would be worse than UK-made goods, says Pitts in response. The carbon footprint is likely to be much worse due to the shipping, if not also from the manufacture itself. Plus, goods made in the UK help boost local economies and communities around any given factory. But, counters Bergin, UK procurement does not currently take this into account 鈥� leaving this consideration down to client benevolence.

Bearle has first-hand experience of the benefit of foreign capital. Japan鈥檚 largest housebuilder, Sekisui House, bought a 35% stake in Urban Splash in a 拢90m deal announced in May.

鈥淲e have a wealth of technical knowledge coming from overseas into the company,鈥� she said. 鈥淚鈥檝e now got two members of their design team working with me.鈥� But she added that Sekisui House is not trying to 鈥渋mplement their thinking about construction on a UK company [鈥�] they are very much coming to learn about the UK construction industry鈥�.

But Hall lamented the lack of internal investment in the UK. He said: 鈥淭he thing that frustrates me is that there is plenty of money sloshing around in the UK in terms of investment capital, and they鈥檙e willing to have a couple-of-million-pound punt on a piece of fintech because it鈥檚 all sexy and modern and based in Old Street. But they couldn鈥檛 give a toss about getting a factory up and running in Hull, which could actually do something really remarkable, and could be an export potential in terms of IP [intellectual property] etc.鈥�

Government support?

For some, the solution to getting offsite construction over the line is government help. 

The state has already committed to a preference for offsite methods in its own procurement. And in sectors where it is the biggest client 鈥� such as schools 鈥� it has overhauled its procurement to create a bigger pipeline while using research funding to try and stimulate an offsite breakthrough. But some think it should go further in regard to pushing housing, where the UK has a dire shortfall.

One audience member, Ridge and Partners鈥� Mark Nieuwenhuys, told panellists: 鈥淚t needs government [to give it] a real push to drive proper volume. Offsite has been around since pre-fabs in the 1950s and 1960s 鈥� we need a drive to get the volume which can make the whole thing work financially.鈥�

Nieuwenhuys shares this view with the House of Common鈥檚 housing select committee. It has called on the government to help 鈥渁ggregate demand for MMC products and bolster domestic supply chains鈥� by mandating housebuilders benefitting from Help to Buy to use modern methods of construction. In its response, published last month, the government said there 鈥渁re currently no plans鈥� to pursue such a policy.

Hall pushed back against setting requirements for MMC from housebuilders. 鈥淚 would fight tooth and nail against pushing us down a mandatory route which actually drives the wrong behaviour,鈥� he said. 鈥淲hat they are doing in Singapore means they are mandating modular when it鈥檚 not what they always need.鈥� Instead, he said, change will be created by clients鈥� demands. 

鈥淲e want zero carbon, we want it built quicker, we don鈥檛 want 500 people on site because it鈥檚 a safety issue or it鈥檚 a logistical nightmare; this is what we want,鈥� he said. If clients say that, 鈥渟omebody will step up to provide it鈥�.