Influences on the construction sector

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Chapter 2

The construction Industry and Modern Methods of Construction

Influences on the Construction Sector

The construction industry is a long established sector which includes a wide variety of contributors. These include: building material suppliers, machinery manufactures, product and component manufactures, sub assemblers, general contractors, facility/building operators and managers, facilitators and providers of knowledge/information (including construction professionals, such as architects, professional associations and training providers), providers of complimentary goods and services (such as transport and demolition) and institutional environment actors (such as communications and financial institutions) Seaden (2001 p.184-185). It is due to the wide range of organisations with varying roles, that creating a change in construction practices is such a difficult task.

Historically the industry has largely been determined by; geographical factors, such as availability of materials and climate, local traditions and culture. (Seaden, 2001, p.183) These factors remain prevalent today, along with other factors such as climate change, government policy, building codes and standards and the economic climate for example. These factors add to the complexity of the task, as not only is there a wide variety of persons involved, performing numerous roles, but there are also minimum requirements and limiting factors to consider.

Traditionally the building practices that have developed as a result of these factors are of the familiar ‘brick and block' method, where materials are transported to site, prepared and fitted. These methods, in 2004, accounted for a large proportion of the construction industry with Goodier (2006, p.591) reporting that 97.9% of construction work was performed ‘on-site'. The result of this is that construction companies are more familiar with the brick and block methods, with regard to supply chains, contracts and construction processes. The use of an industry standard practice that is universally accepted as the norm has other implications within the industry, not only for the construction professionals, but also for the client and users of the buildings. These issues will be discussed in depth in chapter 3.

Modern Methods of Construction

The Housing Corporation classification system has been adopted by the industry as the standard means of identifying Modern Methods of Construction, due to their position within the industry. “Most MMC being constructed at present is subject to Housing Corporation Grants, or is on English Partnership sites: in both cases their selection criteria use the Housing corporation classification system,” (NHBC Foundation, 2006, p.3). It is due to this fact that the classification methods have widely been adopted as the industry standard.

The headline figure suggested by Goodier and Gibb (2006), that 97.9% of all construction work takes place ‘on-site', should be treated with caution, due to the way in which MMC's are classified. Although, “typically MMC involves the manufacture of house parts off-site in a specially designed factory” (Parliamentary Office of Science and Technology, 2003, p.1) and that “the great bulk of MMC is actually off-site technologies” (Pan, 2006, p.20), it has also been established that “Innovative methods of construction used on-site and the use of conventional components used in an innovative way” (Venables, 2004, p.2) is also included under the definition Modern Methods of Construction and so would not be included within this valuation. It is for this reason that at this stage it is important to define what constitutes an MMC.

NHBC Foundation (2006 p.4) explains how the term MMC may fall under a number of similar headings due to the lack of standardised terms that are used throughout the industry, pre-fabricated construction, system building, or industrialised construction for example. These terms are usually used within construction to define a general property of the MMC's, for example pre-fabricated construction constitutes a part of the construction that was built and assembled off-site. This excludes all on-site MMC's and so this should be taken into consideration when particular references and figures are used that may only represent part of the total usage of MMC's.

There are five main categories that MMC's can be defined by;

  • Volumetric - Offsite Manufactured, three dimensional units that are simply lifted onto preformed foundations forming a dwelling.
  • These can often include bathroom or kitchen ‘pods'

  • Panelised - flat panel that is constructed in a factory and then assembled on site to form the three-dimensional structure
  • Hybrid - A mix of panelised and volumetric units
  • Sub assemblies and components - larger components that can be incorporated into MMC or conventionally built dwellings, such as chimney stacks
  • Site-based modern methods of construction - “Innovative methods of construction used on-site and the use of conventional components used in an innovative way”

(NHBC Foundation, 2006, p.3)

A more in depth description of the methods and their inherent advantages and disadvantages can be found in Appendix A

MMC's Usage in the UK

In 2003, it was the opinion of ODPM (2003, p.1) that “Modern Methods of Construction (...) are in their infancy in the UK.” The idea that the industry is in its early development is supported by a large proportion of the professional literature. Pan (2006, p.183) expressed that, the off-site-manufactured side of Modern Methods of Construction, including Volumetric, panellised and hybrid systems are viewed to be very conservative in both nature and scale of innovation within the UK.

Although the industry is viewed to be in its early development, this is not necessarily the case. Work produced by Taylor (2009, p.4) states a number of historical examples of offsite MMC's being implemented. Between 1918 and 1939 around 225,000 houses were constructed using MMC's because of the housing shortfall that was created by World War One. This was due to a shortage of both skilled labour and materials that had been diverted into the war effort, and thus stimulated a search for methods of construction that could alleviate the problem. These MMC's consisted of around 20 steel framed housing designs, and numerous systems involving pre cast and insitu concrete, timber and occasionally cast iron systems based on traditional methods. Post World War Two saw the integration of more MMC's in the form of pre fabricated frames made from timber, steel and concrete. These were designed to help rebuild the damage caused by the war, but also to complete the slum clearance that had begun in the 1930's. The objectives were published on a government white paper and designed to utilise the industrial capacity of the country that had developed during the war.

As innovation within construction is classified as a type of MMC, Diekmann (2007, p.652), makes the observation, that innovation is also not a new concept, referring to the point that construction has innovated in the past, for example changing materials away from iron, and towards steel.

Although it can be viewed by some, such as Diekmann (2007) and Taylor (2009) that the use of MMC's have been a historical part of construction, the fact remains that MMC's today make up a small proportion of the industry. In 2004 Goodier (2006, p.591) valued the total offsite MMC market at 2.1% of the total UK construction Industry, this equates to around £2.24bn.

Even though it has been established that the industry is relatively small, these figures do appear low; there are a number of possible reasons for this. Firstly the data provided by Goodier (2006, p.591) has been calculated using total production of manufacturers in the UK and will exclude all imports and all UK exports. This is viewed as significant by Goodier (2006, p.591), as cladding systems for example are mostly imported. Another example of offsite technologies that may not be included in output data would be that of large one off projects. Goodier (2006, p.591) give the construction of Heathrow Terminal 5, that was constructed in 2005 using mostly offsite technologies, as an example of this. This is due to some of the technologies being included in the data by manufactures in the UK, and the rest from other countries not being included, as opposed to the construction being included as a whole.

This figure also excludes MMC's that take place on site. This is due to the near endless examples of what can be included within this definition and it is for this reason that valuation of MMC's as a whole is not feasible. General trends in the use of MMC's however can be established from the data provided on offsite constriction methods. Rosenfeld (1994, p.540) states, that “where the balance between risk and benefits has been tilted towards the benefits” innovation is more likely to occur. This would suggest that if there is a low risk and offsite technologies are being increasingly adopted, there would be expected to be an increased probability of innovation taking place. Contradictory to this, if there is a lesser uptake of offsite technologies, then there is likely to be a greater risk and thus a lesser probability of innovation taking place. This is supported by Pan (2006, p.189) who states that “Construction companies are typically risk averse and do not include many innovators or early-adaptors.”

A further possible reason for these figures being low was suggested within the same study by Goodier (2006). It was suggested that “many customers routinely use methods such as precast concrete without appreciating that this is a form of offsite”. This lack of understanding shows that what is viewed as an MMC and what is viewed as a traditional method by different actors within the industry may also have an impact on the total output figures. Chapter 3 will discuss in more detail the problems associated with peoples understanding of MMC's

NHBC Foundation (2008, p.3) states that “three years ago the market for offsite solutions in the UK was worth £2bn a year”. This value is similar to that given by Goodier (2006, p.591) reinforcing the points suggested previously that MMC's make up a small proportion of the industry.

The same study conducted by Goodier (2006) also categorised the proportion of offsite that is used in new build construction. A value of £53.3bn is given for the total sector in 2004, with 4.1% of that constituting offsite MMC's, which equates to around £2.18bn. This shows that the vast majority of the offsite industry is within the new build sector, of which new housing constitutes a large share, 17.25% of the total private sector output in 2004.

Figure 2.1 shows the growth projections set out in research by Goodier (2006) from 2004 until 2009. The graph shows that Buildoffsite predicted that by 2009 the sector would be worth £6bn, whereas a slightly less ambitious value of £4.5bn was predicted by Loughborough University. These predictions have been made using information regarding increasing orders in areas that use prefabrications, such as prisons, railways and call centres for example.

Samuelsson Brown (2003) also made a future prediction, again by value, as to the level of offsite to be expected. The work predicted a 9.7% growth in the industry per annum by 2010; however this cannot yet be confirmed or disproved. All of the professional literature reviewed has predicted an increase in MMC uptake from the early 2000's until 2010, “demand for offsite is clearly increasing”. Goodier (2006, p.585)

NHBC Foundation (2008, p.3) states that in 2008 the possible market now available to the offsite industry was worth over £6bn, showing a rapid growth over 4 years with the potential size of the industry tripling. Taylor (2009) produced findings, on the behalf of Buildoffsite, that found that the sector, when including “buildings, building elements and structures is currently worth around £2-3 Billion per year”. This shows that although the industry is growing, the speed and area of growth is less certain. The same report by Taylor (2009) did however report that the market share of offsite in the UK has increased by 25% each year since 2005, which shows that there is further possibility for growth in the future. Pan (2006) reports that 58% of the top 100 housebuilders in the UK plan to increase the volume of MMC'S use over the next 3 years, with the remaining 42% stating that they planned to maintain current levels, none of the respondents reported a reduction in MMC'S usage. This demonstrates that there is a strong intention for housebuilders to increase the use of these methods over the next few years.

It can be presumed to a certain extent that offsite production in house building is likely to have grown alongside the other sectors and that there is a general trend of an increase in MMC technologies. The possible reasons for the level of growth lower than expected will be discussed in more detail in chapter 3.

The Housing Shortfall

With the historical presidencies mentioned above, that MMC's have been used to deal with an under supply in housing in the past, and the current housing shortage that is being experienced today, is an increased adoption of MMC's a possible solution?

Numerous headline figures have been expressed by a wide range of sources, from newspapers to government reports, defining the level of housing that is required today and in the near future, for example “the UK requires 200,000 houses per year for the next decade” (Market Transformation Programme, 2008, p2) and Goodier (2006, p.585) “(...) studies have shown that 225,000 new homes will be needed each year up to 2016 in England alone”.

Currently, there are 25.7 million households in the UK, with this total set to increase by an average of 223,000 per annum between 2008 and 2026 (Office of National Statistics, 2008). Worryingly however, The National Housing Federation (2010), reported that in 2007/8, only 176,000 new homes were constructed with a lower 122,000 predicted by the industry in the year April 2009/10, the lowest number since 1923 (excluding the war years).

There are a number of suggested reasons for this decline in housing output. The Market Transformation Program (2008, p.2) suggests that this is due to a drop in the number of houses built by social landlords, and maintains that the number of speculative developments has remained rather constant at around 120,000 per year. It is the opinion however of Baseley (2009), the chief executive of the House Builders Federation, that “Housing supply is being strangled by the lack of mortgage availability”. The cause of this housing shortfall is somewhat out of the scope of this paper however, the issue that remains is that output is required to increase to meet demand.

The increased demand in housing is attributed by the Office of National Statistics (2008), to be due to an increase in population and an increase in the number of people living alone and has been calculated by projecting current trends. Pan (2006, p.183), Goodier (2006, p.585) and the Barker Review, 2003, have expressed concerns that increased housing demand is restricting economic growth and hindering access to housing. It is also affecting the distribution of wealth within our society as house prices are being forced ever higher particularly in the South-East.

Summary

Influences on the construction sector where discussed in detail followed by a detailed description as to what constitutes an MMC. The past present and future trends of MMC's in the UK where established in detail followed by a breakdown of UK housing supply.

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