Health sector construction output increased by 7% in 2016
to reach £3.1bn, followed by a 6% increase in 2015. Prior to this, the sector
had experienced four years of declining output between 2011 and 2014. Into the
medium-term, AMA Research expects steady, if moderate, growth in healthcare construction
output, with annual rates of growth of 3-5% currently forecast to 2021 as work
on small hospital projects is boosted by privately-funded projects under PF2.
Health
output has benefited from the hospital building programme initiated by the
previous government, much of which was delivered under PFI programmes. Despite
a handful of large PFI hospitals still expected to complete over the next
couple of years, the emphasis is now firmly on smaller acute projects through Procure21+ and Procure22 and in the primary care sector on GP surgeries/health
centres through ExpressLIFT. Public
sector output has however experienced fluctuations due to budget cuts impacting
on the sector.
As a result of GP-led commissioning and
financial constraints, the procurement of services to the NHS, including
construction, are increasingly looking towards increased partnership with the
private sector. A further driver is also taking place in the acute healthcare
sector with the creation of NHS
Foundation Trusts, under which hospitals can generate their own income. As
a result, there has been a rise in private providers refurbishing part of
existing hospitals, adding extensions, new-build facilities or even taking on
the full operation of a hospital.
Future prospects look relatively bright, with
the Government having announced a forward pipeline of around £5.7bn worth of
capital projects in the healthcare sector between now and 2020, and beyond.
This includes nearly 600 individual health projects under almost 100 schemes,
which are mainly spread across the English regions, of which there are around
10 large NHS-led capital programmes, in addition to smaller works and capital
programmes procured via the Procure
21/Procure21+ frameworks. However, whilst the Department of Health was
allocated £4.8bn for capital investment for each year to 2020-21 in the 2016
Budget, this represents a real-terms cut of 1.7% per year.
The moderate forecast of 3-5% growth per
annum is based on the steady level of health sector new orders over the last
2-3 years, and the focus on delivery of local services and chronic disease
prevention initiatives put forward by successive Governments. Health RMI into
the medium-term is also likely to remain positive but moderate and there are
likely to be significant regional differences, especially where demand for key
services is high. The focus on partnerships to drive increased efficiency and
productivity, whilst lowering construction and maintenance costs is forecast to
continue.
Keith
Taylor, Director of AMA Research, commented: “The key construction opportunities in the healthcare sector are likely
to be in the primary care sector and this may entail further opportunities for
the development of hub facilities and integrated GP premises, while in the
acute and secondary sector, much of the medium-term is expected to lie in
refurbishment and extensions. Contractors will also be interested to see how
new procurement routes and private finance initiatives, including P22, will be
used to procure work in the health sector in 2017/18 and beyond, with the
expiration of the Express LIFT framework and future options for health PPPs being
explored.”
The ‘Healthcare
Construction Market Report – UK 2017-2021 Analysis’ report is published by
AMA Research, a leading provider of market research and consultancy services with
over 25 years’ experience within the construction and home improvement markets.
The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242
235724.