Primary care developments, hospital refurbishments and the construction of care homes and nursing homes are expected to provide opportunities for the healthcare building industry over the coming year as the recent trend of lucrative multi-million pound contracts draws to a close.
While the large hospital schemes that have kept the sector going for the best part of a decade will all but dry up over the coming months, there will still be contracts to be won, according to forecasters.
The Government is seeking to rein back capital expenditure and healthcare – particularly major hospital projects – do not seem to be the priority
Construction analysis agency, Glenigan, reports there are currently just over 780 hospital projects in the pipeline of various sizes. Of these just 15 are for major new hospitals worth more than £100m, with just one of those having already started on site. A total of 176 of the hospital schemes are worth more than £5m, with 111 involving refurbishment. All the rest are lower-cost contracts mainly involving the refurbishment or extension of existing facilities.
The primary care sector is expected to prove particularly lucrative as GPs modernise the estate to coincide with the take-over of NHS commissioning duties. Glenigan reports around 820 health centre and surgery projects in the pipeline, with 71 on site already. Most of these are in the £1m-5m band.
Changes to the healthcare marketplace are also providing opportunities within the social care sector as the Government pushes to keep patients out of hospitals and living independently in the community. This means there is likely to be continued investment in specialist care and nursing homes.
There seems to be more activity at the primary care level, with a focus on care in the community and the emergence of clinical commissioning groups to replace primary care trusts next month
Speaking to BBH , Nick Thomas from property and construction experts, The Thomas Consultancy, said: “In general we would expect to see far less major new hospitals being built. The Government is seeking to rein back capital expenditure and healthcare – particularly major hospital projects – do not seem to be the priority. As with other public sectors, refurbishment is more likely to be the name of the game.”
He predicted that, with the dwindling popularity of PFI, the majority of health projects will be procured through the Procure 21+ national framework and will focus on smaller, largely refurbishment projects.
He added: “There seems to be more activity at the primary care level, with a focus on care in the community and the emergence of clinical commissioning groups to replace primary care trusts next month.”
Much has been made of public sector cuts and the impact upon various sections of the economy, especially the construction industry. However, this sector has shown that it does not just rely on government funding to sustain activity
The changes in the market come after a surprisingly buoyant year in 2012 which did not see a downturn in healthcare contracts anywhere near the scale as had been predicted or had been the case in other sectors. Much of this was due to private sector contracts.
A Glenigan spokesman said: “The sector performed unexpectedly well in 2012 as private sector health operators continued to invest in new construction projects.
“The level of health building is closely linked to the funding of the NHS. Much has been made of public sector cuts and the impact upon various sections of the economy, especially the construction industry. However, this sector has shown that it does not just rely on government funding to sustain activity.”
The forecast for 2013 though does show a decline in project starts of around 18% - the biggest drop of any sector. Education, office and commercial and private housing show the greatest activity.
Uncertainty is still hovering over the infrastructure sector and we are at this point in time forecasting a contraction, but that is highly dependent on if, when, and how the replacement for the PFI scheme is introduced
The Glenigan spokesman said whether this trend continued or the sector would see improvements was down to the Government’s funding intentions, adding: “Uncertainty is still hovering over the infrastructure sector and we are at this point in time forecasting a contraction, but that is highly dependent on if, when, and how the replacement for the PFI scheme is introduced.”
BBH this week spoke to one of the country’s leading healthcare construction companies. A spokesman said: “It’s tough at the moment. Not only are the projects harder to win, but they are worth less overall, so you need to more of them.
“What we are also finding difficult is the lack of knowledge about how these developments will be funded moving forwards. This will become more problematic as we get nearer to the next General Election as we are all quite worried there will be a repeat of what happened last time when the newly-elected government just put everything on hold for over a year. We all put a lot of money into winning these contracts and companies are going to be nervous about doing that if they know they won’t get a return on their investment for many years, or if they fear a scheme will not go ahead at all. That’s why we are waiting to see what the Government will do in terms of PFI.”
