Healthcare construction industry ‘cautious’ about apparent boost in trade, warning of negative impact of proposed cuts to capital spending

Construction start-ups have been in decline for nearly two years, but over recent months the market is showing signs of growth, and experts say cash needs to be made available if this improvement is to continue. A report by construction analysis, forecasting and intelligence firm, Glenigan, shows that while May saw a jump in the value of contracts across the board, this slipped back in June and July. However, the healthcare market is managing to buck this trend, particularly in London and the South, where there are a growing number of projects being agreed.

We are seeing work coming through and a renewed focus on repair and maintenance in the healthcare sector

The report by the company states: "Scotland, the North East of England and the East Midlands were particularly badly hit in terms of new work; Northern Ireland, the East and North West of England saw at least a 15% drop in activity; but in the South West there was a rise in the value of starts. The region was particularly buoyed by an increase in new health and industrial construction work."

This view is supported by healthcare firms, which are confirming a turnaround in recent weeks. A spokesman for Interserve told BBH there has been a subtle shift from major building projects to revamps, adding: "We are seeing the South West work coming through in line with the Glenigan report and a renewed focus on repair and maintenance in the healthcare sector."

But, while this is being seen as good news, experts are warning that the figures are higher due partly to the bad weather at the start of the year, which delayed work on site. And they are warning that the improvement will not be maintained if the Government makes huge cuts to capital investment in the public sector. Simon Storer of the Construction Products Association said it was lobbying Whitehall chiefs to make sure investment in the public estate did not fall below 2.25% of the GDP, adding: "This is not special pleading, but studies show that investment below this figure will lead to a deterioration of the country's built assets. Such a relapse would inevitably harm the international competitiveness of UK business and result in higher long-term costs for future maintenance and replacement of these assets. Capital spending is one of the most effective ways the Government can invest to stimulate the economy and secure a long-term recovery. Or, to put it another way, a healthy construction industry is synonymous with a healthy economy."

Capital spending is one of the most effective ways the Government can invest to stimulate the economy and secure a long-term recovery. Or, to put it another way, a healthy construction industry is synonymous with a healthy economy

He said the association was appealing for government and industry to engage in a discussion that would identify opportunities in which public spending on construction can deliver better value for money, looking particularly at improving procurement processes and taking a more integrated approach to estates management.

The Glenigan report supports this view, stating: "Government funding cuts have stemmed the flow of public sector projects and weak economic growth has dampened private investor confidence."

But the continuing lack of development finance remains a major obstacle to a sustainable recovery, with surveyors still pessimistic about future prospects

Simon Rubinsohn, chairman of the Royal Institution of Chartered Surveyors (RICS), added: "The constructions sector seems to finally be lifting its head above the recession parapet, but the continuing lack of development finance remains a major obstacle to a sustainable recovery, with surveyors still pessimistic about future prospects. Concerns over likely cuts in public spending is another factor contributing towards the cautious stance."

Following the announcement of the Comprehensive Spending Review earlier this year, capital spending in the NHS was reduced by 17% and the Government has instead thrown its weight behind the continued use of private funding to make the necessary improvements needed to the healthcare estate. NHS LIFT is also being adapted to provide a tried-and-tested system for enhancements.