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Landlord closes both its loss-making modular factories
Swan will close both of its in-house modular housing factories after revealing they had struggled to make a profit.
The Essex-based housing association will stop production at its two Basildon factories, one which produces steel modular housing and the other which makes cross-laminated timber (CLT) systems.
The landlord will focus instead on completing the modular homes on its £130m Beechwood Village estate regeneration project for Basildon Council and Homes England.
Susan Hickey, chief executive of Swan Housing Association, said: "It has been a difficult decision for the Swan board to close our factory operations given the impact that this will have on our people.
"However, it is simply not financially sustainable to continue to build homes using modular construction, with Swan’s factory having been running at a loss."
Ms Hickey said the landlord is doing everything it can to support its staff who have been affected by the closure.
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She added: "I would also like to reassure our customers who are already in the process of buying, or have already bought a modular property from us at Beechwood West, that we are retaining the skills required to complete these homes and to deliver any aftercare and remediation works required.”
The closures came to light after an e-mail sent to Swan staff was obtained by Construction Enquirer explaining the decision.
The news of the closure follows the announcement that the deadline for Sanctuary’s rescue of 11,500-home Swan was missed last week.
This is because the associations said they still needed “appropriate consents” and “commercial discussions” with third-parties had yet to be concluded.
Instead, Sanctuary said it will offer managed services to Swan in the meantime.
In better news for the landlord, credit ratings agency S&P said Swan is on course to have its credit rating upgraded when the landlord’s merger with Sanctuary completes in the next three months.
The association has faced severe cashflow issues, as Inside Housing reported last month, that Swan could run out of cash to fund its subsidiaries if a rescue deal with Sanctuary was unsuccessful.
Swan was one of the first housing associations to open its own CLT factory in 2017, as a way of reducing contractor delays on its nearby Beechwood regeneration projec, and cutting down on waste.
However the association was later forced to scale back its production of CLT, which is combustible, following the post-Grenfell ban on combustible materials.
In 2020 Swan partnered with Panattoni, the largest developer in Europe, on its new steel modular factory in Basildon which was expected to deliver 1,000 homes a year.
The modular housing sector has struggled to establish itself in the UK, and earlier this year saw the collapse of high-profile modular firm House, a joint venture between developer Urban Splash, Japanese housebuilding giant Sekisui House and Homes England.
Meanwhile, in July developer Countryside closed one of its three modular factories in a bid to claw back some of its manufacturing losses.
L&G’s modular housing arm, which operates from its 550,000 sq ft modular factory near Leeds, has racked up significant losses since its launch six year ago, recording a £37m pre-tax loss last year.
However the company has announced two big deals recently, a 1,000-home contract with Vivid and a 400-home contract for L&G Modular Homes with Wolverhampton City Council, announced in September.
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