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Offsite investment 'below 2%' at most firms

A survey of top construction industry executives has revealed the majority of firms invest less than 2 per cent of company revenue in offsite construction.

The data collected by law firm Clyde & Co showed 55 per cent of the 31 executives surveyed invested 0-2 per cent of revenues, with 26 per cent investing 3-10 per cent and 20 per cent investing 10-20 per cent.

Despite of the low levels of investment, offsite modular construction was still named by respondents as the technology that could have the biggest impact on a contractor’s business, ahead of BIM and 3D printing.

The capital investment needed for offsite construction was preventing firms from developing their capabilities in this field further, Clyde & Co found.

Contractors said they were reluctant to commit this investment due to a lack of a dependable and visible pipeline of projects that will use a high level of offsite modular construction.

Rail Industry Association technical director David Clarke said this pipeline was not coming through, as clients were not confident that contractors could deliver such jobs.

“At the moment we are between a rock and a hard place,” he said.

Respondents said the government could help change this, partly through the “presumption in favour” of offsite solutions announced in the Autumn Budget, but also by going further and demanding contractors either produce offsite solutions or explain why they are not.

The survey also revealed a fear among contractors of being supplanted by new entrants to the market if they do not realise the benefits of offsite construction.

“We need to undertake a radical digital transformation or we could be wiped out when the Amazon, Google or Tesla of construction comes along,” Costain water sector head of supply chain Steve Fozard said.

Investment in the area could be set to ramp up, as 62 per cent of respondents said their investment in offsite construction would equal 3-10 per cent of revenue in five years’ time.

There were still legal questions around offsite construction however, as some respondents said the allocation of risk and liabilities could be different through the supply chain compared with traditional methods.

It was also unclear how payment would work, the respondents said, with current terms normally seeing contractors paid after materials reach site, which would be a problem if modules are built using offsite methods weeks or months before they reach site.

Advance payment from clients would probably be needed, according to Clyde & Co, with measures in place to ensure work was being carried out and to give clients some protection if a contractor fell into insolvency.

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