Why Modular Construction Companies have been failing.

By Andrew J Bannister | Founder, GUILD of MMC

The world desperately needs 35 million social housing units annually. Modern Methods of Construction should be booming. Yet across the USA, UK, and Europe, we've witnessed a graveyard of modular companies: Katerra ($2.4 billion), Veev ($600 million), Ilke Homes (£320 million in debts), Lehto Group (Finland), L&G Modular, Modulous, and dozens more.

The technology isn't the problem. The business models are.

The Five Fatal Flaws

1. Factory Before Pipeline

Companies built massive factories requiring constant output—before securing guaranteed orders. As L&G's chairman admitted: "Without the necessary scale of pipeline, it is not sustainable to continue producing modules." Factories haemorrhage cash when idle.

2. Venture Capital Incompatibility

VC expects rapid scaling and quick exits. Construction delivers long project cycles and thin margins. When interest rates rose, funding evaporated overnight. Ilke Homes collapsed within weeks of investors pulling the plug—despite a £1 billion order book.

3. Overambitious Vertical Integration

Katerra tried to be architect, engineer, manufacturer, and contractor simultaneously across multiple countries. Industry veterans now conclude: "Having an ecosystem of small companies working together to supply factories is better than one vertically integrated operation."

4. Tech Founders Underestimating Construction

Unlike software, construction varies by geography, weather, and local codes. Katerra tried to serve an entire continent without understanding that "each state treats modular differently in terms of codes and regulations." The industry requires flexibility, not standardisation.

5. Fixed-Price Contracts in Inflationary Times

Contracts signed on tight margins were destroyed by materials inflation and labour costs. Factory overheads amplified the pain when variations weren't possible.

What Actually Works

The survivors—BoKlok (Ikea/Skanska), TopHat, Volumetric Building Companies—share common traits: patient capital from established players, deep local market knowledge, guaranteed pipelines before factory investment, and partnership ecosystems rather than vertical integration.

"We are very focused on multifamily high-density modular construction, and we already do it. Katerra was trying to boil the ocean." — VBC CEO, who acquired Katerra's assets

The Path Forward

MMC remains essential to solving the global housing crisis. But success requires committed government partnerships providing pipeline certainty; consortium approaches with specialist partners rather than monolithic companies; flexible systems adaptable to local conditions; and sustainable financing through social impact mechanisms and carbon credits—not impatient VC money.

The failures weren't of modular technology. They were failures of business models that assumed construction could be disrupted like software.

It cannot. But it can be transformed—with the right approach.

Sign Up for the GUILD of MMC

___

Andrew J Bannister is founder of GUILD of MMC, an international construction consortium addressing global social housing shortages through Modern Methods of Construction, sustainable financing, and government partnerships.