Government investment needed to provide opportunities for construction sector

Fresh analysis of healthcare construction industry predicts downturn in activity following General Election

The future of the healthcare construction industry in the UK is largely dependent on direct government investment in NHS facilities over the coming years, experts are warning.

Construction analyst, Glenigan, has released its latest figures for the sector, predicting a downturn in activity for the remainder of 2015.

The report states: “There were hopes that the PF2 contract arrangement, the result of the Government’s review of the Private Finance Initiative, 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 the previous coalition Government and the Treasury, point to openness to private investment into energy infrastructure, but much less so for social infrastructure projects.

Comments from the previous coalition 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.”

Glenigan figures show that 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 12% during the first half of 2014. However, the second half of the year brought some respite, with starts rising by 35% compared to relatively-low levels in the same period a year earlier. This took full year growth in starts to 8%.

And, while starts then fell back sharply during the first quarter of this year, a rally during the three months to the May General Election made the sector one of few bright spots in the industry as construction starts contracted overall.

But the report states: “This rally is not expected to last, with a decline in starts forecast for 2015 as a whole.

“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 a drawn-out investigation by the Competition Commission into the sector.”

This points to sector activity remaining dependent upon direct government investment in NHS facilities, alongside private investment in the smaller private health sector

Across all sectors, the August Glenigan Index fell by 27% compared to a year earlier, due to private sector clients having delayed schemes in the aftermath of the election.

Every sector tracked saw a decline in starts compared to a year earlier. However confidence remains strong in the English regions, Scotland and Wales with every part of Great Britain, except London and the South East, seeing the value of work approved increase during the second quarter of this year.

In the healthcare sector, the areas with the biggest construction projects starting on site this year are the East Midlands, North West, South East and West Midlands.

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