Wales and East of England provide biggest opportunities for healthcare construction

Uncertainty over government funding prompts fears for future of the sector

The new £3m Cotswold Water Park Dementia Care Home is one of the projects recently approved

Wales and the East of England are key areas of growth for the healthcare construction sector, according to a new report.

The August Economic & Construction Market Review, released by construction sector analyst, ABI Barbour, reveals an increase of 2.4% in contract awards within the construction sector as a whole in the second quarter of this year compared with the same period in 2014. Overall, April was a flat month, with a decline in activity in May, but growth reported in June of this year.

Figures suggests that the healthcare sector will improve in the medium term, but how much of this is available for capital projects remains to be seen

The main reason for the increase in output across all sectors is an increase in new private housing and infrastructure projects.

However, the healthcare sector has not fared so well.

The figures reveal that just 2% of construction contract activity was in the medical and health sector, compared to 14% for education, 17% for retail, 26% for residential, and 27% for infrastructure.

Levels decreased by 21.8% in July this year compared to June, with the total value of contracts awarded standing at £124m based on a three-month rolling average. This is 7.9% lower than the values in July 2014.

In the three months to July this year the value of contracts decreased by 19.2% on the previous three months and was 23.7% lower than the same period in 2014, indicating a longer-term decrease in the value of contracts awarded in the sector.

But some areas are providing fresh hope for developers and architects.

Wales was one of the main locations for development in the sector this month, capturing 24.3% of activity, an increase of 13.9% from July 2014. One project in particular – the development of the new Cardigan Integrated Health Centre in Dyfed - is valued at £20m.

Overall, construction activity in Wales is said to be up 13.9% since July 2014. Other regions to see an increase are the South West (up 7.4%), the West Midlands (up 3.2%), the North East (up 5.1%); and the East of England (up 15.5%).

But for the other areas there has been a slump in activity. The biggest downturn is in London, where there has been a 19.6% drop in activity; while Yorkshire and Humber is down 11.7%, Scotland is down 6.5%, the East Midlands and North West have both seen a 2.9% fall, and the South East is down 1.3%.

ABI Barbour has released its latest Economic & Construction Market Review

In terms of where the money is being spent within the healthcare sector, public hospitals accounted for 56% of contracts awarded in July, a decrease from the 64% share it had in July 2014. Hospices, nursing and psychiatric homes accounted for 25%; while surgeries and health and medical centres contributed 18% of the activity.

Among the projects to recently be given the go-ahead is the £3m new Cotswold Water Park Dementia Care Home. The project starts on site in October and is expected to be completed by October 2016. A privately-funded development, it is being built by Stepnell.

Barbour ABI’s lead economist, Michael Dall, said: “The Summer Budget 2015 commits to increasing NHS funding in England by £10billion in real terms by 2020/21, above 2014/15 levels.

“This suggests that this sector will improve in the medium term, but how much of this is available for capital projects remains to be seen.”

The report also reveals the top 10 clients, architects and contractors within the healthcare sector.

Dumfries and Galloway Health Board, Aneurin Bevan Health Board, the Royal Infirmary of Edinburgh NHS Trust, Papworth Hospital NHS Foundation Trust, and Royal Liverpool and Broadgreen University Hospitals NHS Trust top the table of clients; while Keppie Design, BDP, Devereux Architects, IBI Group and HLM Architects are reporting the most new contracts in the sector. Contractors topping the table are Laing O’Rourke, Kier Group, Brookfield Multiplex, Skanska, and Interserve.

Click here to read the full report.

Companies