Future of healthcare construction 'bleak', but opportunities are coming through

Experts predict growth in research and laboratory projects and warn of the need to address skills shortage

Investment in research and laboratory facilities is helping to counteract a significant fall in the number of hospital construction projects starting on site in the UK, according to industry experts.

The underlying value of healthcare construction projects has been on a downward trajectory since the beginning of 2013, with projects starting on site in the three months to September 2013 down 36% on the previous year. This followed a 17% drop in the value of projects securing detailed planning approval during 2012.

This makes the healthcare construction sector among the worst affected by the current economic situation, which has seen public-funded projects scaled right back.

The last three months has seen the value of planning approvals decline by 23% and NHS funding remains constrained

A spokesman for construction analyst, Glenigan, said: “The last three months has seen the value of planning approvals decline by 23% and NHS funding remains constrained.

“The prospects for health-related construction look bleak, with a further slowdown of new project starts expected during 2014. The NHS capital budget will remain unchanged next year, representing a fall in real terms.

“This is expected to severely impact on starts of health projects especially care centres, as trusts look to get the most out of existing facilities. However, a few major hospital projects will still be brought forward, some of which will be funded using the PF2 private finance arrangement.

“Private investment is providing a growing share of work in the sector, with Glenigan tracking increases in the value of nursing home construction on site over the last two years. Investment in medical research facilities has increased during this year and further projects are expected to be seen over the next year.

“However this work makes up a small portion of the sector and will be outweighed by the cuts from NHS spending. Starts are expected to fall next year by 12%, an increase in the rate of decline from 2013’s weak performance.”

However, two major multi-million-pound projects are providing some hope – the £167m new children’s health park in Liverpool; and the £243m second phase of Ulster Hospital.

And investment in research and lab facilities is also providing opportunities for construction companies working in the sector.

“The drop in project starts seen this year has been due to a fall in hospital starts, the largest sub-sector, and health centres,” said the Glenigan spokesman.

“However other areas remain positive; research and laboratories starts have increased by 24% so far this year, and nursing homes saw a 3% rise.”

Looking ahead to the rest of 2014, he said private investors would offer a new route to market, adding: “A group of major insurers announced their intention to invest £25billion in UK infrastructure projects over the next five years. Specific projects were not detailed, but they are looking to invest in energy, housing, transport, health and education projects.”

Particularly buoyant will be the hotel and leisure, retail, industrial and office sectors.

Apprenticeships and on-the-job training schemes are the best way forward and the Government is getting onside over skills training, but everything is too slow

At a national level, the West Midlands, South West, East of England, North East and Yorkshire and Humber regions all saw starts across all sectors decline compared to the levels of a year ago. The most-severe drop was felt in the South West, which saw a 29% decrease.

London saw a modest rise of 2%, while strong double-digit growth was seen in the South East, East Midlands, North West and Scotland.

The highest percentage growth was seen in Wales and Northern Ireland, where new starts are recovering from low levels seen at the turn of 2013.

Responding to the figures, Will Davies, managing director of property maintenance and refurbishment company, aspect.co.uk, warned that as well as the need for innovative public and private financing methods, the construction industry also needed to address a shortage of skilled tradesmen.

He told BBH : "All the building trades have been hit by the recession and the slowdown in housing market. As a result, 25% of plumbers and 19% of bricklayers left their trades over the preceding four years. We desperately need to train young people in those skills.

"Apprenticeships and on-the-job training schemes are the best way forward and the Government is getting onside over skills training, but everything is too slow.”

This is supported by the UK Commission for Employment and Skills (UKCES). Spokesman, Douglas McCormick, said: "Businesses need to start thinking about planning their talent pipeline now, not waiting until they are unable to fulfil contracts because of a lack of skilled staff."