Construction market hits five-year low

Healthcare construction projects dwindle as market shows signs of slowing down

The healthcare construction sector is experiencing a downturn in activity after months of growth

After bucking a trend that has seen the UK construction sector experiencing a major downturn in recent years, the health and care infrastructure market is beginning to show signs of slowing down.

After months of continuous growth in terms of the volume of new construction projects, and the value of those schemes; one of the best periods for growth in the sector is coming to an end.

Following good growth in April, contract awards for the medical and health sector decreased by 9.1% in May 2018, according to the latest Economic & Construction Market Review from industry analysts Barbour ABI.

The value of contract awards in May this year was £209m, based on a three-month rolling average - 167.3% higher than May 2017.

For the three months to May 2018, total contract awards values were £638m, an increase of 70.4% on the previous quarter and 159% higher than for the corresponding quarter in 2017.

Scotland was the leading region for contract awards in the medical sector in May with a 41.5% share, an increase of 40.5% on May 2017.

The value of healthcare projects by region. Source - Barbour ABI

Scotland leads the pack

The largest medical and health contract in Scotland in May was the Western General Hospital Programme in Edinburgh and was estimated at £30m.

The programme contains eight projects at the hospital which include new work, alterations, refurbishment and repair and is a joint venture between Robertson Group and FES.

Across May we continued to see the decline in housing and infrastructure construction, with the value of new work in construction reaching its lowest point since January 2013

In Inverness, Simply Construct UK will build a new care home at Cradlehall Farm.

Valued at around £6.5m, facilities will include en-suite bedrooms, day rooms, quiet rooms, kitchens and dining rooms as well as offices, landscaping works and parking provision.

The second-largest region was the South West with a 19.9% share of contract awards, compared to 15.1% share in May 2017.

The largest contract in the South West in May was the £15.5m project for the provision of an intermediate care facility at Bulford Barracks in Salisbury as part of the Project Allenby scheme.

And, in Bristol, Stepnell has been awarded the £8.5m contract for a new 64-bed care home and 24-bed re-ablement centre at Cadbury Heath.

The only other region with a significant share was the North West, with 15.2% of contract awards values, an increase of 10.9%.

Project value showing three-month rolling average

Public hospitals accounted for the largest share of contract awards in the medical and health sector in May with 56% share, an increase of 34% on May 2017.

Surgeries, health & medical centres were the second-largest sub-sector in May with 27%, which compares to 49% share in May 2017; while hospices, nursing and psychiatric homes had a 13% share, an increase of 4% on May 2017.

The downturn in May echoes what is going on across all construction sectors.

The value of new construction contracts across the markets in May reached £4.5billion, a decrease of almost 10% compared to April, and the lowest figure for over five years.

The two largest sectors in construction - residential and infrastructure - both saw a decline as the industry continues its slump this year so far.

The largest project by value across the month was the £130m Wembley Stadium Station housing development.

The value of new construction projects across all sectors in May reached £4.5billion, a decrease of £10% compared to April

Residential market suffers setback

But, generally, the residential sector saw a dip in activity of 5.7% compared to the previous month.

Across the rest of construction, industrial and education were the only sectors in May that produced positive growth in contract values, increasing by 2.2% and 4.6% respectively compared to the previous month.

While it’s encouraging that the industrial and education sectors saw contract values increase, the deficit was too large to make up the shortfall, with both housing and infrastructure continuing in their slump

The biggest fall came from commercial and retail construction, which despite having the largest project of the month, fell by almost 30% when compared to April figures.

Regionally, London was the region with the largest share of contract awards value in April with 18.8% of the total, with four of the largest 10 projects across May.

The capital was followed by the East of England with 14% and the North West with 13%.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “Across May we continued to see the decline in housing and infrastructure construction, with the value of new work in construction reaching its lowest point since January 2013.

“While it’s encouraging that the industrial and education sectors saw contract values increase, the deficit was too large to make up the shortfall, with both housing and infrastructure continuing in their slump.”

Click here to read the market review in full.

The top 10 projects across all construction sectors

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