Our Development team at DWF recently had the privilege of hosting a panel discussion with some of the UK's leading experts on Modern Methods of Construction (MMC) post-COVID and were delighted to be joined by; Nigel Banks from Ilke Homes, Matt Scarrott from the NHBC and Andrew Smith from Savills. With such a diverse range of experience, and perspectives, we were able to explore many of the reasons why MMC is being considered more than it ever has done in recent years with new innovations leading to higher standards, more durability, ever increasing sustainability as well as more lenders having a clearer policy on MMC.
Special Projects Manager at Ilke Homes, Nigel Banks, got the session underway as he highlighted that MMC could be a major contributory factor in the government achieving their target of 300,000 new homes a year by the mid 2020's. Although MMC currently only accounts for a small percentage of these new homes being delivered, a growth in investment into modular design has led to a much needed increased rate in the number of these homes being delivered each year through MMC. Ilke Homes were themselves involved in a deal with Homes England in November 2019, which was the first directly government backed investment into a modular housing factory with £30m of funding to build further capacity. It is with investment like this that we are seeing businesses like Ilke Homes able to grow. In addition Nigel was keen to emphasise that a major benefit of MMC is the increased durability of designs which ultimately will enable them to gain certifications such as NHBC Accepts and BOPAS. It was on the former of these that Matt Scarrott, of NHBC (the UK's largest warranty provider on new homes), provided us with some fascinating insights into NHBC's attitude to MMC and the journey NHBC has been on with MMC to enable insurance of MMC products.
Modular housing has of course been around for some time, though it has only been fairly recently that we have seen design life significantly increase to enable NHBC and others to meet their minimum 60 year lifespan requirement on units. Matt highlighted the improved production methods as well as innovative materials, which MMC perhaps lacked in the past. Andrew Smith of Savills who writes loan security reports for lenders highlighted that this advancement has led to at least four major lenders developing an MMC policy where previously mortgageability would have been extremely difficult. Andrew is keen to increase the confidence in MMC with lenders, broadening the number of providers, and is working closely with Mark Farmer (a prominent figure in the construction industry following the release of his UK government commissioned 2016 report) on a number of strategic initiatives to try and reach these goals. Andrew was keen to stress that MMC can be lent against and can be used as security against such loans.
The panel agreed that MMC could help to mitigate some of the risk faced by the construction industry in its growing skills gap, with lower numbers of skilled tradesmen growing year on year – which seems likely to be exacerbated by Brexit. The ability of offsite construction to adopt a standardised production process negates the need for as much skilled labour and during events such as the Covid-19 pandemic can help business comply with social distancing guidelines. Ilke Homes illustrated the benefits of MMC in relation to skills by confirming that 95% of circa 500 employees do not require a trade background.
MMC can also be a key plank of the Climate Emergency which has been declared by numerous Local Authorities in the UK as well as the Government's green agenda. Whether that be decreasing the amount of energy used through the build process or more efficient materials. Nigel highlighted a number of key areas in which this could be done, including higher levels of airtightness, better heat recovery and improved water management systems to name just a few.
In summary, there is certainly an increased appeal and push towards MMC, particularly in a post-Covid world highlighted by more Government action and incentives, external investment and the industries growing acceptance for change. Andrew Smith for one certainly feels like this change and increased adoption will accelerate over the coming years. For example, many of the UK's Registered Providers are being encouraged to adopt MMC for their new development sites. Standardising the production method will be one of the next critical advancements which will be made easier with the further modernisation of factories by increasing automation and wider collaboration.
We would like to thank Nigel Banks, Matt Scarrott and Andrew Smith for joining us on what was a fascinating discussion on an important topic within the industry.
This session was moderated by Guy Rusling at DWF, Head of the Development subsector for the UK, who provided us with these final thoughts:
"It is clear that MMC which has been around for some time is becoming a more important sector within the development/construction industry. Costs are coming down as production processes become more efficient, the insurers and lenders are increasingly on board as standardisation is adopted and values can be relied upon. Furthermore Government policy seems certain to be aligned behind MMC as the green agenda gains traction and influences housing policy. We certainly expect to see more adoption of MMC on development sites going forward"