Timber structures Off-site construction
Stacking up off-site timber construction financials
Dr Mila Duncheva analyses the effects of Covid-19 on economic sustainability.
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peculation abounds about the negative impact of the pandemic on the construction industry, such as challenges created in the supply chain and managing labour on site. Others have seen the brighter side thanks to off-site construction, with suggestions that building in the factory is the only viable option for the continuous growth of the construction sector, as it provides a more socially distanced environment with fewer changes in the number of people and trades involved dayto-day than traditional on-site construction.
Offsite timber volumetric construction adapted from Duncheva (2019). Credit: Mila Duncheva
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This is all well and good, but if the numbers don’t stack up, the social distancefriendly working conditions won’t be enough to convince off-site sceptics – and the opportunity to enhance environmental and social sustainability by building off-site with timber will be missed too. Construction output contracted by 40% at the start of the pandemic and looking at the economic sustainability of offsite construction is more pressing than ever. We need to bust the myth that off-site construction is not financially viable.
Off-site timber economic sustainability: Scotland The Increasing Offsite Housing Construction in Scotland project – funded by the Scottish Government More Homes Division, Scottish Enterprise and the Construction Scotland Innovation Centre – mapped the capacity and productivity of 15 off-site timber manufacturers in Scotland and also investigated the publicly available financial metrics of 31 off-site product manufacturers in Scotland. The project concluded that, in 2018, the off-site sector in Scotland had an estimated £275m turnover and 1,686 employees with projections to reach £317m turnover with 1,724 employees by 2023. Most interesting were the results from the business model analysis, which used the available financial records of nine of these businesses who had consistently submitted full financial accounts for four years. All of the nine businesses produced off-site timber products – the predominant material used in off-site manufacturing in Scotland. The businesses outperformed the average statistics for the construction industry regarding: • profit • debtor and creditor payments • liquidity. Among these, the profitability of construction businesses is often the main sticking point in conversations about the financial viability of off-site construction in the boom-and-bust property cycles. The mean performance of the businesses in the latest available financial year analysed, 2018, can be assessed using three key performance indicators: • Gross profit – the ratio of the difference between sales and the cost of goods sold to total revenue expressed as a percentage. • Profit margin – the ratio of profit (loss) before tax to total revenue expressed as a percentage. • Return on Capital Employed (ROCE) – the comparison of net operating profit (loss) to capital employed expressed as a percentage. >> Timber 2021 Industry Yearbook
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