Modern methods of construction

Modern methods of construction (MMC) have many perceived benefits including speeding up the delivery of projects, improving quality and safety, cutting carbon emissions and reducing costs during the construction process. It has the government’s backing with the government looking to increase investment in this area and encourage the use of MMC. 

The Construction Playbook (providing guidance on how public works projects are to be assessed, procured and delivered) sets out the government’s aim to move towards using MMC 'where appropriate'. As a large purchaser of construction services, the government has the potential to offer welcome investment into this area. However, in a MMC guidance note published by the government in September 2022, it recognises the challenges of attracting further investment: “Productivity growth in the UK construction industry is stagnant; since 1997 the annual rate of improvement in productivity has been 21% lower than the wider economy, undermining the value of investments made by both public and private sector clients. The industry faces further challenges with comparatively low levels of capital investment, limited innovation and increasing workforce pressures.”

The recent insolvencies of a number of modular specialists may also negatively impact investment in this area. Insolvency remains a key concern for the industry with the Construction Leadership Council's (CLC) latest product availability statement noting “that the year to June recorded the highest annual level of insolvencies amongst UK construction firms since the financial crisis over 10 years ago, despite strong demand throughout the first half of the year”. The CLC states that a key risk going forwards “is to what extent sharp cost rises and slowing demand over the next six months will exacerbate the rise in insolvencies”. The unpredictable economic climate is likely to hamper much needed investment in MMC at least in the short term with businesses focussed on costs reduction and minimising project risk.

Many funders find investing in MMC projects more difficult. On a traditional build funding is made available as works progress on site, so the project that is being funded (and the lending is secured against) appreciates in value as works progress. Where MMC is used, much of the funding provided is wrapped up in the manufacturing process and the value to the site will not be realised immediately.