Legal & General is expected to reduce its workforce in Selby, Yorkshire, as demand for its modular homes has fallen short of expectations.
Legal & General (L&G), an FTSE 100 asset management and pensions behemoth, will shutter its modular housebuilding factory, putting 450 jobs at risk and casting doubt on the future of an ostensibly pioneering industry.
According to sources, the COVID-19 pandemic and planning delays were significant contributors to the unit’s inability to deliver sufficient orders to become profitable.
L&G launched its modular housing division seven years ago and constructed a factory with the capacity to produce 3,000 modular dwellings annually.
Although exact sales figures for the division are unknown, those familiar with the matter assert that it significantly underperformed expectations.
They added that it will complete existing orders to assure delivery.
The decision will be perceived as a severe setback to a segment of the housing market that was intended to make home construction cheaper and quicker.
L&G founded the company as part of a self-proclaimed mission to make “housing fairer for all” during a time of intense scrutiny of the sector and government housebuilding goals.
L&G issued the following statement: “Legal & General has announced that it intends to reduce business activity and cease new modular production at its Modular Housing Factory in Selby, Yorkshire while reviewing and evaluating potential strategic options for the business.
“As a startup business with a substantial fixed cost base, L&G Modular Homes requires a strong and predictable site pipeline to be profitable and sustainable.
“As part of its efforts to combat the housing crisis, Legal & General Modular Homes constructed a large factory to produce significant housing volumes; however, this comes with significant operating costs, making a reliable pipeline essential.
These factors, coupled with lengthy planning delays in the United Kingdom and recent major macro events such as COVID, have prevented the company from securing the necessary pipeline scale to make the current model function.
The company added that it would “begin consulting with all employees regarding the proposal to eliminate the majority of Modular Homes positions.”
“The company will do everything possible to support employees during this difficult time and will actively pursue redeployment opportunities.”
Since the establishment of the modular housing business, L&G has accrued losses of close to £175 million, according to media reports from the previous autumn.
An L&G insider contrasted the difficulties of the modular housing division with the company’s overall housebuilding presence.
CALA, a subsidiary of L&G, and its affordable homes division have constructed 15,000 dwellings over the past three years.
It aims to recruit an additional 15,000 over the next three years.
Under L&G’s stewardship, CALA’s revenues grew from approximately £250 million to $1.25 billion, according to the source.
The closure of its Selby factory comes as L&G prepares to name a successor to Sir Nigel Wilson, the company’s long-serving chief executive, who has refocused the company’s investments on urban regeneration and social housing, among other areas.
