Image of two workers at modular construction factory

David Harris, CEO of Premier Modular, reflects on the state of the construction industry’s economy, the financial flexibility modular solutions offer and how this form of construction can inject hope into the industry’s future

Material costs, struggling supply chains and the widespread labour shortage continue to put pressure on the construction industry’s economy.

The decline in residential construction activities, coupled with the significant decline of traditional skilled labour in the wake of Brexit and the Covid-19 pandemic, have caused issues for the construction industry’s economy.

The large number of labourers approaching retirement age is only exacerbating this dilemma, with one in five builders aged over 50 creating a skills time bomb that could devastate the industry.

This encroaching retirement crisis is fueling labour inflation and contributing to the widespread disruption of traditional construction programmes.

With many sectors feeling the impact of this disturbance, the exponential growth of modular construction presents a welcome opportunity.

Fast and flexible, modular building is on track to secure a lucrative stake in the construction market.

The current outlook of the construction economy

The ongoing skills crisis, inflated material costs and supply chain delays driven by geopolitical events, have come to define the construction industry over the past couple of years.

Government statistics released in June showed that the material price index for all construction work in May 2023 increased by 4.7 per cent in comparison with the same month in 2022.

Collectively, these problems have stifled the industry’s recovery from the pandemic and energy crisis, extending lead times far beyond schedule.

As a result, many clients are facing huge delays for projects to be completed and are finding it increasingly difficult to plan for new facilities to be built using traditional construction programmes.

This is a serious issue for organisations in the health and education sectors in particular who are under immense pressure to keep building programmes moving forward, often on a tight budget and within a short timeframe.

The shift many construction companies are undergoing to become more sustainable is equally having an effect on the industry’s economy.

New priorities to adopt more sustainable construction methods are causing further construction delays

Whilst necessary, new priorities to adopt circularity, focus on through life costing and reduce embodied carbon – emissions generated through the construction of a building – are engendering further delays to building programmes.

Offsite construction is far ahead of the curve in this regard, with methods like modular building already offering sustainable solutions due to the precision manufacturing of components inside a controlled factory environment.

This ensures zero waste goes to landfill and additionally maximises energy efficiency. As the traditional construction economy struggles to make headway towards meeting their sustainability targets and initiatives, modular building is emerging as a cost-efficient antidote to programme delays, enabling projects to be handed over in a matter of weeks.

Digital construction is helping to facilitate building costs

Digital adoption has been relatively slow in the construction industry, which can be largely attributed to a lack of investment in new technologies and a historical failure to upskill workers in order to equip them to use digital tools or resources.

However, technological acceleration in the past few years has started to change this narrative, most notably in the growing use of building information modelling (BIM) to create coordinated, three-dimensional designs.

Such insight helps to determine data-driven outputs that inform how a building will be constructed and managed after project completion.

This technology has brought huge benefits for the industry and clients alike, by facilitating greater control over the project to reduce costs whilst simultaneously providing a faster delivery.

Evolutions in artificial intelligence (AI) and smart construction are also expected to improve efficiency, data flows and risk management in the industry in the coming years.

Such innovations could unlock opportunities to determine realistic timescales for projects, mitigate site risks such as fall hazards and improve contract risk management.

However, the efficiency these developments could bring to traditional construction projects is already being actualised by the offsite construction industry. The precision manufacturing technology used in offsite variants like modular construction dramatically accelerates project delivery.

The majority of building work goes ahead inside a controlled factory environment, unaffected by inclement weather, human error and the complications of a live site.

Already one step ahead of the wider construction industry, modular building is set to take full advantage of AI and will use it to breathe new life into the industry’s economy.

The impacts of the construction industry’s economy on the public sector

Recent instability in the construction industry’s economy and outputs has particularly impacted the public sector.

Battling with budget restrictions, tight deadlines and higher priorities, healthcare and educational institutions are struggling to invest in the new facilities they desperately need.

The skills shortages and supply chain issues within the construction industry are pushing these institutions to adapt rather than providing the future-proofed, high-quality spaces they require to deliver exceptional services.

Despite the economic challenges, modular construction can produce facilities quickly with minimal delays to building programmes.

This is achieved through the manufacture of modules inside a factory which ensures a rapid installation onsite. As a result, site operations like teaching and emergency services can continue as normal, with limited interference.

The cost certainty of modular is crucial in times of economic turbulence

Given the financial constraints healthcare and educational institutions face, the cost certainty modular construction provides is equally important during periods of economic turbulence.

Modular buildings can be either permanent or rental – eg paid for through a set contract or leased on a short or long-term basis to suit specific needs.

This financial flexibility gives institutions greater control over their capital and operational expenditure, with temporary solutions in particular allowing institutions to ramp up their capacity within restrained budgets.

The ability to reconfigure, relocate and reuse modules also supports the circular economy, enabling institutions to satisfy their ESG commitments at the same time.

What is the future outlook of the construction industry’s economy?

Whilst a multitude of factors have undermined the growth of the construction industry in recent years, it remains resilient, and has a promising future ahead thanks to the success of offsite methods like modular construction.

Projected to be worth over $131bn by 2030, the modular market is expanding exponentially as the government, and sectors across the board, begin to recognise its potential.

Ensuring a cost-effective and reliable delivery of projects, modular construction will be pivotal to reviving the industry’s economy, driving skilled work and sustainable growth for generations to come.

 

David Harris

CEO

Premier Modular

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