Fears as healthcare construction sector takes a hit

Glenigan figures show market is slowing due to lack of funding and dwindling budgets

Has PFI put the future of healthcare construction in doubt?

Despite Government figures showing that more than £1billion is being invested in healthcare construction over the current financial year, fears are growing for the future of the sector.

Whitehall’s Construction Pipeline, published at the beginning of this year, reports investment of £127billion in infrastructure and estate across all sectors to 2020 and beyond.

Health construction was the weakest-performing area of projects starting in 2013 and activity remained subdued during the first half of 2014

Within the healthcare sector it outlined a total of 520 projects collectively worth £995.39m in 2014/15, and more than £79m being invested from 2020 onwards.

But new figures released this week by construction market analysts at Glenigan suggest opportunities are dwindling.

The report states: “Health construction was the weakest-performing area of projects starting in 2013 and activity remained subdued during the first half of 2014. The value of underlying project starts fell by 9% during the first half of 2014. However, the second half of the year brought some respite, with starts rising by 33% compared to relatively-low levels in the same period a year earlier.”

Part of the problem is the unease over PFI contracts and the failure to embrace the PF2 updated version of the funding stream.

The report states: “There were hopes that the PF2 contract arrangement, the result of the Government’s review of the Private Finance Initiative (PFI), would allow private investment to fill the void left by declining NHS capital funding.

“However, the use of the PF2 has as yet been far from successful. It is being piloted in the Priority Schools Building Programme, where its use has been cut back sharply.

“Comments from Government and the Treasury point to openness to private investment into energy infrastructure, but much less so for social infrastructure projects. This points to sector activity remaining dependent upon direct government investment in NHS facilities, alongside private investment in the smaller private health sector.

Unfortunately, NHS capital budgets are being trimmed to meet rising costs elsewhere in the service. In addition, there are currently few reasons for private healthcare providers to invest

“Unfortunately, NHS capital budgets are being trimmed to meet rising costs elsewhere in the service. In addition, there are currently few reasons for private healthcare providers to invest, especially following an investigation by the Competition Commission, which has ordered the forced sales of some London facilities.”

Between 2012 and this year the South East saw the most investment in healthcare construction, followed by the London region. Northern Ireland saw the lowest level of investment, according to Glenigan figures.

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