L&G’s modular homes losses hit £279m

Legal & General is heading for a total loss on its abortive push into modular housebuilding of close to £300 million after disclosing another £44.3 million of losses at its Yorkshire plant in 2023.
Cumulative losses at the factory had climbed to £279.2 million by the end of last year and the business is still in the process of being wound down, according to a new filing at Companies House.
The accounts also reveal that the insurer injected an additional £39.5 million of equity capital into the subsidiary, L&G Homes Modular, last year in order “to execute its strategy,” which has already been fully written off.
The plan to manufacture 3,500 pre-fabricated homes a year was launched in 2015, the vision of former chief executive Sir Nigel Wilson, but the project was eventually abandoned in June 2023. L&G has blamed “long planning delays” for being unable to scale up its pipeline of work.
The factory in Sherburn-in-Elmet, near Leeds, reduced its monthly average workforce from 549 to 312 last year, but continued to operate in order to supply pre-fabricated units to a development in Bristol.
Sales of modular units in the year amounted to £12.4 million, compared with £39.9 million in the previous year, while administrative expenses and impairments pushed the operating loss to £59.9 million. Tax credits reduced the bottom line deficit to £44.3 million.
Fees and salaries to the four directors increased from £986,000 to £1.7 million as they received £503,000 in termination benefits. The highest paid director received £859,000 in total, including a £167,000 bonus.
The stock was written down by £17.8 million partly as a result of an increase in expected losses from supplying the Bristol development, according to the accounts.
An L&G spokeswoman said: “All losses have been accounted for and were provisioned for in our results when we announced the closure. Of our three legacy sites, we have completed Selby and Broadstairs, and Bristol continues to progress to plan with residents expected to move in shortly.”
L&G at its last annual reported a pre-tax profit of £195 million, down from £989 million a year earlier due to the combined hit of the failures of the modular homes venture and of Onto, a venture aiming to rent out electric vehicles. Group adjusted operating profit came in at £1.7 billion.
Modular homes are assembled in factories with modules wired, plumbed, decorated, carpeted and fitted out with kitchens and bathrooms — before being loaded on to a lorry and delivered to building sites.
In theory, they require fewer costly skilled tradespeople and lead to far less snagging, which is so costly to traditional homebuilders. Modular was forecast to be a key factor in boosting homebuilding in the UK, but those hopes have been partly dashed.
Daniel Paterson, director of policy at Make UK Modular, said: “At its height, the fully manufactured homes sector had a capacity of about 25,000 homes a year. Today, capacity stands at about 4,000.
“While it is deeply regrettable that a number of early adopters did not survive the scaling period, those who are following are learning and adapting to build that capacity back and contribute towards delivering the truly affordable homes that our society needs.”
Some blame the planning system, with Michael Gove, the former housing secretary who served in the last government opposed to “identikit” houses. The downturn in the housing market over the past two years has slowed demand from housebuilders.
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The logistics of moving big modules from a factory and on to sites has also proved tricky. L&G was one of those firms forced into a costly rethink.
“To make modular work, you need as many common components as possible [and] you need scale and certainty of delivery so that the factory runs efficiently,” explained the former boss of one big housebuilder. “But our planning system is slow and unpredictable and wants everything to be different.”
Dean Finch, chief executive of Persimmon, recently blamed some subcontractors for the slow progress. “Some subcontractors are very used to and willing to work with [modular homes], others are not,” he said.
There are still strong hopes for modular, however as Labour promises to free up planning and the processes and technology behind this industry, which is still in its relative infancy, are further refined.
Finch has said that if ministers are to hit their target of building 1.5 million homes over the next five years, the country will have to embrace off-site manufacturing.