Legal & General (L&G), the FTSE 100 asset management and pensions giant, is to close its modular housebuilding factory, in a move which will put 450 jobs at risk and cast doubts over the future of a supposedly pioneering sector.
Sky News has learnt the company informed staff at its site in Selby, Yorkshire, that it intends to stop producing there following years of weak demand.
Sources said the COVID-19 pandemic and planning delays had been major factors in the inability of the unit to deliver sufficient orders to become profitable.
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L&G established the modular housing arm seven years ago, building a factory with the capacity to construct 3,000 modular homes each year.
Although specific sales figures for the division are unclear, insiders said it had significantly underperformed expectations.
It will complete existing orders to ensure delivery, they added.
The decision will be seen as a significant blow to a segment of the housing market which was supposed to make constructing homes cheaper and faster.
L&G had established the business as part of a self-proclaimed mission to make “housing fairer for all” during a period of intense scrutiny of the sector and government housebuilding targets.
In a statement issued in response to an enquiry from Sky News, L&G said: “Legal & General has announced today that it is proposing to reduce business activity and cease new modular production at its Modular Housing Factory in Selby, Yorkshire, whilst reviewing and assessing potential strategic options for the business.
“As a start-up business with a significant fixed cost base, a strong and predictable site pipeline is required to make L&G Modular Homes a successful sustainable business.
“As part of its ambitions to tackling the housing crisis, Legal & General Modular Homes built a large factory to deliver impactful housing volumes, however, with this comes significant running costs making it essential to have a reliable pipeline.
“These factors, coupled with long planning delays in the UK and recent major macro events such as COVID, have meant the business has not been able to secure the necessary scale of pipeline to make the current model work.”
The company added that it was “commencing consultation with all employees around the proposal to make the majority of Modular Homes roles redundant”.
“The business will be doing all that it can to support employees during this difficult time and will be actively exploring opportunities for redeployment.”
Media reports last autumn suggested that L&G had accumulated losses of close to £175m since the modular housing business was set up.
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One person close to L&G contrasted the travails of the modular housing arm with its wider housebuilding presence.
Through CALA, an L&G subsidiary, and its affordable homes arm, it has built 15,000 homes during the last three years.
It is targeting a further 15,000 during the next three years.
CALA’s revenues grew from about £250m to £1.25bn under L&G’s ownership, according to the source.
The closure of its Selby factory comes as L&G prepares to name a successor to Sir Nigel Wilson, the long-serving chief executive, who has pivoted the group towards big investments in areas such as urban regeneration and social housing.
