Public hospitals still driving construction contracts
New-build and refurbishment of public hospitals continues to drive the healthcare construction market, according to the new figures.
Barbour ABI research shows that August 2017 provided a welcome boost for the construction industry as a whole, as the value of new contracts awarded across all sectors reached £5.8billion based on a three-month rolling average – the highest figure recorded since March.
Levels of activity in the medical and health sector increased by 4% in August compared to July, with the total value of contracts awarded at £138m based on a three-month rolling average. This is 8.8% higher than the values in August 2016.
The healthcare investment market is still proving resilient despite the challenges posed by Brexit
This makes up 1% of the overall construction contracts during August, with the main activity – 26.9% – in the North West of England, primarily due to the development of a new mental health unit in Southport, which was awarded to Farrans Construction.
The contract for the refurbishment of West Cumberland Hospital’s Henderson Suite, awarded to Thomas Armstrong Construction and valued at £2m, also pushed up the value of in the sector.
The London region accounted for 24.7% of contracts awarded, mainly due to the redevelopment of the Evelina Children’s Hospital, awarded to Galliford Try and valued at £7.5m.
Public hospitals remain the dominant sub sector with 39% of the value of contracts in August – a decrease from 49% the previous year.
Overall, although the contract awards are much lower than in previous years; August saw a third month of value growth.
A Barbour ABI spokesman said: “The data shows a UK economy that is coping well with the headwinds currently facing it, but signs that the rising level of inflation is impacting on overall consumer spending and therefore the level of economic growth.
“As the Brexit negotiations continue, more certainty will certainly help businesses with their investment decision process.
“However, given the lack of progress thus far, it is difficult to assess its full impact on UK economic growth in the future.”
Latest ONS figures show the construction sector in the UK shrank by 0.9% between June and July this year, at 0.4% lower than July 2016.
The main reason was output declines in new work in private housing and infrastructure.
In September, the medical and healthcare sector made up 2% of construction activity, up from 1% in August
But the market remains healthy, with Colliers International recently reporting continued investment in the sector.
In contrast to the more-positive pattern of recent years, there have been generally-negative trends in the elderly, personal and specialist care sectors, but the nursing sector has proved a little more resilient.
The data shows a UK economy that is coping well with the headwinds currently facing it, but signs that the rising level of inflation is impacting on overall consumer spending and therefore the level of economic growth
Walter Boettcher, chief economist at Colliers International, said: “The healthcare investment market is still proving resilient despite the challenges posed by Brexit.
“Reviewing UK REIT performance since the EU referendum in June 2016 shows that healthcare properties performance, as measured by share valuations, were less affected and recovered faster than mainstream UK property asset classes, especially those with exposure to central London.
“Ex-London assets and assets secured by long operational income linked to the real economy look to be generally affected less by Brexit than those with greater exposure to the financial economy. In contrast to the EPRA UK indices as a whole, which remain down by 3% since June 2016, Healthcare REITS are up by between 11% to 15%.”