Merit: The prefab disruptor

Almost a decade ago, Tony Wells had an epiphany after realising he couldn’t grow his off-site manufacturing and construction business, Merit. “I announced to the management team that whatever we’d done in the past was wrong,” says Wells from the firm’s base in Cramlington near Newcastle.

“We ripped up the business plan and went back to first principles: if we had a clean sheet, how would we do it?” he explains. “I couldn’t find a business model that was scalable.” Wells, 59, an electrical and controls engineer, took on the business with his wife Kirsty in 2002.

Wells knew he couldn’t match the economies of scale of the construction giants, but he was always a fan of Clayton Christensen, the American academic who developed the theory of disruptive innovation.

“We looked at disruptive business models because disruptive small company business models normally win against incumbents,” he says. “We were doing tier one, two and three contracting. You could see that over the long term, you wouldn’t make any money out of tier two and three. We just stopped doing that.”

Sales dropped like a stone. “I had sleepless nights,” recalls Wells, “but it was the right choice.”

Dealing directly with the ultimate client – tier one – without the subcontracting tiers paid off. Merit turned over £88.4m last year, against £60.2m in 2022, and enjoyed a profit of £8.2m. It now employs 350 bioscience, battery manufacturing and semiconductor sectors.

It has constructed Halley VI research station modules for the British Antarctic Survey project, units for the Harrods luxury department store in London, clinical laboratories for the Moderna biotech firm in Oxfordshire and even a community hospital at Berwick.

“In our little way, we’ve got something which is fundamentally better,” Wells says, citing the speed at which Merit completed the Autolus Therapeutics biotech lab at Stevenage, Hertfordshire. “That would normally take a five-year build from inception to use. We did it in 22 months.”

Timing is one element of Wells’ formula for success, sustainability and costs are the others. “The climate crisis presents an opportunity,” says Wells. “We banned gas from our buildings in response to Greta Thunberg’s UN speech and realised that once you drive that innovation, you can create sustainable buildings without an increase in costs and using less energy.”

And those costs? “The industry spends £3bn on estimating – and it’s 98 per cent wrong,” Wells says. “We’ve come up with a parametric cost model that’s eliminated estimating from our business. We design from a ‘don’t draw what you can’t afford’ mentality.”

With the landscape littered with the hulks of so many collapsed modular housing builders, Wells’ embracing of disruption is laying the foundations for a prefab future.