Modern methods of construction Contents

6Supply chain

61.Many witnesses cited the lack of established supply chain as one of the largest barriers to greater uptake of MMC.94 More joined-up working and investment is needed to establish resilient supply chains, but for this to happen, manufacturers need greater certainty in the demand for their products and developers need to be sure they can overcome shortfalls in delivery, should they encounter problems with a particular supplier.

Aggregating demand

62.Some witnesses said the Government should help to aggregate demand for MMC homes to shore-up supply chains for the components incorporated in those developments and reduce the risk of not being able to source certain components.95 Homes England set out in their Strategic Plan 2018/19- 22/23 its priority to create new “strategic partnerships” with housing associations and work towards the delivery of at least 130,000 affordable housing starts by March 2022. Homes England are helping to increase demand for MMC products by requiring housing associations and homebuilders they support, to incorporate some form of MMC in developments of over 50 units. They also told the Committee they award additional points to companies bidding for their contracts if they go beyond the minimum.96 Mark Farmer identified the Help to Buy Scheme as a publicly funded scheme that does not include any form of conditionality linked to modernisation of building methods.97 Others have indicated that homes that benefit from public money could have conditionality attached in order to increase certainty in the MMC supply chain.98 The Minister of State for Housing indicated he is willing to have a look at whether Help to Buy could be used in this way.99

63.It is clear that for both suppliers and developers there is a lack of robust supply chains and this is a major barrier to greater uptake of MMC. The Government has the potential to shore-up supply chains through wider use of mandating for MMC in developments which benefit from public money. Though this should be used with caution so as not to deter developers from building at all if they are unable to use traditional methods.

64.The Government should consider setting requirements for homebuilding developments that benefit from public funds—such as those sold through Help to Buy Schemes—to incorporate the use of MMC techniques, to aggregate demand for MMC products and bolster domestic supply chains.

Designs for MMC homes

65.Uncertainty about the resilience of the supply chain is one of the barriers that prevents greater uptake of MMC. The estate agent, Savills explained that the Greater London Authority has commissioned work to look at a standardised design code for MMC homes to increase compatibility and repeatability of components.100 This would help to aggregate demand for those components that meet the codes and provide manufacturers with greater certainty of ongoing demand for them. It also helps to prevent the need to create bespoke products for each new housing development. While it is not desirable to have large numbers of identical homes, housing providers such as Swan Housing Association are demonstrating that it is possible to have a basic model for modular homes which can be replicated to achieve economies of scale but with the potential for customisation, so that the aesthetics and lay-out of homes are varied to suit the customers’ choice.101 As well as choosing internal finishes, fixtures and fittings, homebuyers can alter the external appearance of their homes and in some cases have the choice between a fourth bedroom or a roof terrace. Swan have also built their own factory to construct homes, which helps them to avoid disruption in the supply chain. This is something more developers are looking to do, in order to vertically integrate production and reduce their dependence on external suppliers.

66.Homes built using modular methods of construction are transported from the factory to the site by lorry. We found some homebuilders limit their homes to a width of 5 metres to comply with normal road restrictions. Although it is possible to bolt additional modules together, some units which are designed as four-bed family homes do not incorporate the living space or storage facilities that many families would require. The Committee raised this problem with the Minister for Housing who said modules transported as wide loads through multiple policing wards would need multiple movement orders but he would look into what can be done.102 During the evidence session it appeared the Government doesn’t have a plan in place to overcome this kind of difficulty. Members of the Committee raised concerns that this undermined the cross-government working at the heart of the Industrial Strategy Construction Sector Deal.

67.The Building Better, Building Beautiful Commission was launched by Secretary of State, The Rt Hon James Brokenshire MP to advise the government on how to promote high-quality design for new homes.103 It should investigate designs for MMC homes that can overcome these size restrictions while delivering high quality homes. Mark Farmer told us that over the next decade he sees an opportunity for “flying factories” located close to the building site:

You will see more and more manufactured content being delivered either at the site or near the site, in what I would term flying factories, where smaller-scale digital manufacturing enables parts of buildings to be put together with a local workforce using manufacturing techniques. We are not there yet but it is coming.104

Identifying best practice in MMC

68.The Government has acknowledged that greater use of MMC could help to increase the supply of housing and is using programmes such as the Affordable Homes Programme and Accelerated Construction programme to promote take-up..105 At the Gateshead Innovation Village, Homes England is partnering with Home Group Housing Association on a live research project to build a village of 35 new modular homes using five different house types and six traditionally constructed homes. The aim is to build a new community that will provide feedback on their experiences and feed into the tracking of the performance of the homes over time. The Innovation Village is a good example of how the Government and its partners can build up data on the performance of homes built using MMC techniques and potentially identify certain methods which should be prioritised and supported. By supporting particular forms of MMC, the Government could help supply chains to mature and give confidence to developers that they will be able to source the materials and components for MMC homes.

69.Through Innovate UK, the Government is providing £6.5 million funding for research and development in panellised systems (category 2 of the definitional framework). In March 2019 it launched the three-year Advanced Industrialised Methods for the Construction of Homes (AIMCH) project, which works collaboratively with industry actors and aims to use advanced manufacturing techniques to overcome the problems the industry faces:

It is expected that AIMCH will result in new digital design tools, manufacturing advancements, improved near-to-market offsite systems and lean site processes. The ultimate goal of the project is to support the sector by delivering the 120,000 target for the same or less cost than traditional craft methods, which are built 30% more quickly plus have a 50% reduction in defects. The project has potential to impact on 35,000 homes being delivered by AIMCH partners across the UK, each year.106

70.Homebuilders must deliver a product which is well designed and desirable to homebuyers; homes need to be adaptable and provide ample living space and storage if they are to meet the needs of buyers. When designing homes, methods of construction and transportation need to be considered at an early stage. If the factory manufacturing components for a build is situated a long distance from the site where homes will be installed, developers might need to consider types of construction, such as panellised units which can be transported within the container of standard sized lorries, rather than modular construction.

71.There is a plethora of MMC techniques being developed and utilised by different homebuilders. This means designs and components are developed to suit a particular method but may not be compatible with another type of MMC. The result is that new designs are required for different developments and components being manufactured for one development cannot be used for another. This prevents homebuilders from taking advantage of economies of scale to drive down costs or the speed advantages of being able to recycle designs.

72.Some types of MMC will be appropriate for certain sites but not others, for example, if there are limitations on site access it might not be possible to install externally produced, modular homes. Therefore, it is not desirable to concentrate too narrowly on certain types of MMC. Likewise, it is important there remains room for innovation in the industry, but it would be helpful to identify, develop and promote a smaller number of techniques to enable the industry to take advantage of economies of scale.

73.We welcome the work Homes England is undertaking to identify the most effective types of MMC through programmes such as the Innovation Village in Gateshead. We also welcome the funding the Government is putting into innovation in panellised systems through Innovate UK to improve advanced manufacturing techniques and believe this will contribute to the establishment of a modern construction industry underpinned by robust supply chains.

74.The Joint Industry Working Group on MMC should undertake further work to identify types of MMC that work best and can be used at scale to deliver the good quality homes this country needs with an emphasis on the functional design for the people who will live in them. This will enable the industry to benefit from economies of scale and bolster the supply chains for those types of product.

75.The Government should use initiatives such as the AIMCH project to harness the skills and knowledge of industry actors to learn what their priorities are and develop best practice in construction in order to build the homes the country needs. The Building Better, Building Beautiful Commission should investigate designs for MMC homes that can overcome road capacity size restrictions, while delivering high quality homes.

Industrial Strategy Construction Sector Deal

76.The Industrial Strategy Construction Sector Deal highlights the opportunities of a modern construction sector for British industry and the potential for the sector to increase export opportunities. However, when we visited live building sites where MMC homes are being installed, homebuilders told us that many developers are importing, most of their machinery, components and materials for building MMC homes from other countries. Businesses in the supply chain for MMC homes face many of the same barriers as homebuilders, including uncertainty about future demand and accessing up-front capital to set-up factories and production lines. The Construction Leadership Council suggested some of the £4.5 billion Home Building Fund could be used to provide low cost loans to businesses in the MMC supply chain.

77.The Government is taking steps to support off-site manufacturing for homebuilding; for example, the Industrial Construction Sector Deal includes £170 million for the Transforming Construction: Manufacturing Better Buildings programme, a proportion of which will be used to support housing.107 In May 2019 the Government brokered a deal with Sekisui House, Japan’s largest homebuilder, to boost MMC in UK homebuilding. Sekisui House invested £22 million and the Home Building Fund contributed £30 million of equity and debt funding into regeneration company, Urban Splash to increase output.108 If the Government kept a record of how many components for MMC homes are being imported, it could set targets for reducing the industry’s reliance on imports and help to measure whether initiatives to bolster the supply chain are increasing capacity domestically.

78.The Government is taking welcome steps to support off-site manufacturing for homebuilding but if the benefits of the Industrial Strategy Construction Sector Deal are to be realised, more of the machinery and components for MMC homes should be manufactured in this country. The Government should record how many components for MMC homes are imported and set targets to reduce their use in proportion to the UK manufactured supply chain. It should enable manufacturers in the supply chain for MMC homes to access low-cost loans through the Home Building Fund so they can invest in factories, increase capacity and help homebuilders to reduce their reliance on imported components. The Government should use its record of imported components to assess the effectiveness of these measures at boosting domestic supply.

94 E.g. Sir Robert McAlpine [MMC0042], Royal Institution of Chartered Surveyors (MMC0040), NHBC [MMC0032]

95 E.g. Construction Leadership Council [MMC0014], National Housing Federation [MMC007]

97 Q8

98 Keepmoat Homes [MMC0041]

100 Savills (MMC0024)

101 Beechwood, ‘Discover a new kind of home, accessed 14 June 2019

103 Ministry of Housing Communities and Local Government, ‘Building Better, Building Beautiful Commission’, accessed 14 June 2019

105 Ministry of Housing, Communities and Local Government (MMC0028)

106 Advanced Industrialised Methods for the Construction of Homes, Press release ‘Innovation consortium set to modernise how we build homes’ 29 May 2019, accessed 24 June 2019

107 Department for Business, Energy and Industrial Strategy, Industrial Strategy Construction Sector Deal, July 2018, p13

108Boost for housing market as Japan’s biggest housebuilder Sekisui House moves into the UK”, Ministry of Housing, Communities and Local Government press release, 14 May 2019

Published: 3 July 2019