Fresh hope for healthcare construction sector

The Government’s pledge to plough more than £8billion into health and social care infrastructure is helping to keep the construction industry afloat as other sectors struggle, according to a new report.

After the poor weather impacting the growth of contracts awarded at the start of the year, it’s positive to see the construction industry bouncing back with a healthy month-on-month increase in activity

Barbour ABI has published its latest Economic & Construction Market Review, which shows that the total value of all new construction contracts awarded in May this year in the UK increased by 5.3% compared to the previous month.

However, the total value of construction contracts in May was 3.7% lower than in the same month last year. Economists believe this indicates that the recent high levels of growth are beginning to slow.

But the health sector is expected to weather the storm, with the value of projects up on last year, pointing to an increase in activity.

The Barbour ABI report states that while activity was down 1.1% in May 2014 compared to in March, the total value of contracts awarded was £222m, 3.5% higher than in March 2013.

It’s encouraging to see the number of projects increasing, which suggests there is a healthy pipeline of work

In the three months to May the value of contracts increased by 69.6% on the previous three months, and by 24% on the same period in 2013, indicating longer-term growth in the value of contracts awarded in the sector.

This optimism was supported by the Government’s unveiling of its National Infrastructure Plan 2012, which committed £4.6billion in health and social care capital in 2014/15 and £4.7billion in 2015/16, including an investment of £1.4billion in hospital upgrades and redevelopments. This year’s Budget speech reiterated that spending, paving the way for a number of new developments.

In terms of region, London saw the most activity, with a 16.8% increase in projects compared to 2013. Yorkshire & Humber saw an increase of 18.5%, while the East of England was 15.3% up on last year. But that was not true across the country, with Wales seeing a 4.6% reduction in activity, and there was a 72% drop in the North West.

The report also breaks down projects by type, with public hospitals the most-common development, accounting for 60% of construction spend. Surgeries, health and medical centres accounted for 15% of the value of projects, a 13% increase on May 2013 due to the switch in activity from acute to primary ad community care infrastructure.

Leading architects in the field are currently HKS International, NBBJ, Devereux Architects, HOK International, Oxford Architects, IBI Taylor Young, Llewelyn Davies, Murphy Philipps, Archial, and P+HS. The most-active contractors are Interserve, Carillion, Kier Group, Skanska, Willmott Dixon, Coffey, Vinci, Galliford Try, BAM, and Morgan Sindall.

It’s even more important that we start to see an upturn in these other key sectors for a stronger, sustained and more-durable economic recovery

Commenting on the findings, Michael Dall, lead economist at Barbour ABI, said: “After the poor weather impacting the growth of contracts awarded at the start of the year, it’s positive to see the construction industry bouncing back with a healthy month-on-month increase in activity. It’s also encouraging to see the number of projects increasing, which suggests there is a healthy pipeline of work.”

But he warned that industry growth is highest in the residential sector, adding: “It’s even more important that we start to see an upturn in these other key sectors for a stronger, sustained and more-durable economic recovery.”

A spokesman for Glenigan added that while large hospital developments were becoming more rare, cash was being ploughed into other areas. He added: “Research and laboratories starts have increased by 24% this year, and nursing homes saw a 3% rise.”

Click here to read the Barbour ABI report in full.