The Economic Value of Off-Site Construction

WPI Economics builds on the Farmer Review to show how the Government can do more to promote Off-Site Construction.

Early this month, the Government responded to the Farmer Review of the UK Construction Labour Model entitled "Modernise or Die". The Farmer Review indicated that the Construction industry was suffering from structural vulnerabilities.

As with other reports, and amongst other recommendations, the Farmer review argued that the Government should take action to increase the uptake of pre-manufactured construction (i.e off-site construction methods). 

The Government response reaffirmed its support for increasing the housing supply, pointing to its announcement for over £25 billion in investment, and the Housing White Paper which frames how innovation will be stimulated and stated an increased commitment to using modern methods of construction. However, the Government has rejected a number of the bolder proposals, including a levy on firms not contributing (either directly or indirectly) to modernisation within the sector.

WPI Economics believes the Government can go further without the need to introduce a levy: our work earlier this year looked at the facts and potential benefits of utilising off-site construction methods more readily. Our recommendations focused on the role that Government procurement can play in promoting the use of modern methods of construction.

The construction sector is vital for the UK economy - but productivity has been stubbornly low

The construction sector is vital to the UK economy and to the Government achieving its economic and social ambitions.

It contributes over £100 billion to the economy and employs over two million people, providing jobs and incomes for families in all regions.

The future opportunities are also huge - with the global construction market set to be worth £15 trillion by 2025.

But our research, supported by Heathrow, found that to make the most of the opportunities available, the sector needs to modernise quickly. At the heart of this should be making the most of the skills and expertise that already exist in the sector right across the UK and, in turn, creating a major new export opportunity for our post-Brexit economy by undertaking a fundamental shift towards off-site construction methods.

Our research found that this approach comes with significant benefits, but just 7% of UK construction is currently undertaken in this way

Over the past 20 years, whole economy productivity in the UK has risen by over 30% and productivity in the manufacturing sector has grown by over 60%. In contrast, productivity in the construction sector has increase by a little over 10%

A move to off-site construction can help turn around poor productivity performance

Off-site construction describes a range of construction activities that bring together construction elements in a factory before installation into their final location.

The process is viewed as a "Modern Method of Construction"

Why use off-site construction?


Projects are less impacted by weather, site and access conditions.

For example, Portakabin Group delivered a nearly 100% budget and timeline performance over 12 months when using off-site construction methods. The industry average over the same time: 40%.

Greater Efficiency

Activities can take place concurrently and delivered when needed on site.

For instance the NAO demonstrated that off-site construction methods could reduce onsite build time for housing by over 50%.


Factory environments typically facilitate the use of tighter controls and more standardised processes.

It is estimated that off-site construction is associated with a 50% reduction in project costs dealing with "snagging".


Off-site construction provides a controlled, clean and warm environment, uses production line techniques, and reduces the need to work at height.

These advantages would reduce the risk of accidents and ill health, which lead to an average loss of 2.2 million working days between 2013-16.


Reducing traffic flows from the central location reduces pollution in the local area.

Research suggests that projects using off-site construction can deliver a reduction of between 20% - 60% in metric tons of CO2 associated with project transport.


Off-site constructions planned deliveries over a short period of time can ease the concerns of local residents.

Responding to qualitative research for a recent report one local authority Director of Planning argued that:

"…they [local residents] don't actually object to the new houses… It's the lorries, the diggers and all that sort of stuff."

By increasing the use of off-site construction to 25% of UK construction projects, productivity in the sector could increase by 3.6% by 2020

Our modelling suggests both GVA and employment growth will be concentrated outside of London with a boost of £4.3 billion to non-London regions by 2020.

Our modelling indicates significant increases in GVA in 2020 - mostly in the Northern Powerhouse resulting from the increase take-up of projects utilising off-site methods.

WPI Economics proposes THREE ways to place off-site construction at the heart of the Government's industrial strategy

Recommendation 1:  Government investment in infrastructure using off-site methods for at least 25% of the project

        Recommendation 2:         Use the balanced scorecard approach to give preference to projects that involve off-site techniques

Recommendation 3: Develop clusters built around off-site expertise via Local growth and devolution

The full report can be read by clicking here.