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Healthcare Construction Market Report - UK 2013-2017 Analysis

Abstract

INTRODUCTION and OVERVIEW

AMA Research are pleased to announce the publication of the 5th Edition of the report: "Healthcare Construction Market Report - UK 2013-2017 Analysis", focusing on key market trends and major structural change within the NHS, which should be of particular interest to healthcare providers and construction professionals involved in the healthcare sector.

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Key areas in the report:

  • Government reform of the NHS and implications of the Health & Social Care Act 2012 for the construction industry.
  • New providers and clients under the new NHS Structure.
  • Analysis of Capital Funding to 2015 and capital funding arrangements under new NHS Structure.
  • Major contractors, consortia, developers and investors involved in the healthcare sector - construction pipelines, budgets, key schemes and players.
  • Detailed analysis of Government's targets for capital spending in the healthcare sector, an assessment of contractors output, key issues for the construction industry and anticipated opportunities for healthcare construction work over the next few years.


Areas of particular interest include:-

  • Potential impact of Health and Social Care Act on the future of the NHS estate and on the development of healthcare premises, including estate rationalization, abolition of PCTs and shift towards foundation trust status.
  • Review of future of main procurement routes and construction programmes - PFI and Private Finance 2 (PF2), LIFT and ExpressLIFT; Hub Initiative in Scotland; Procure21+; Designed for Life: Building for Wales and Frameworks Scotland - construction pipelines, budgets, key schemes and players.
  • Review of major changes facing the NHS under the Health Act, which will see local commissioning groups take responsibility for around 80% of the NHS budget for health commissioning services.
  • Shift away from major new build hospital schemes towards local and primary health facilities and refurbishment schemes. NHS LIFT and P21 construction pipeline to 2015.
  • Review of growing involvement of private sector and commercial providers in NHS primary care provision.

Some of the companies included:

Bam Construction, BMI Healthcare, Boots, BUPA, Capita Symonds, Care UK, Genix Healthcare, GTD (Go To Doc), Integrated Dental Holdings Ltd, Interserve, IntraHealth, James Hull Group, John Laing, Kier Project Investments, Laing O'Rourke, Lend Lease, Malling Health, MedicX Fund, Miller Construction, Morrison's, Oasis Group, Ramsay Healthcare, Robertson Construction, Ryhurst, Sainsbury's, Spire Healthcare, SSP Health, Tesco, The Carlyle Group, The Practice, Vinci, Virgin Care, Willmott Dixon.

Key areas covered in the report include :

PUBLIC SECTOR HEALTHCARE IN THE UK

  • Overview and new Structure of the NHS - England, Scotland, Wales - Government reforms of the NHS and implications of new Health & Social Care Act.
  • New Providers and Clients under new NHS Structure - CCGs, Foundation Trusts, NHSCB.
  • Size and condition of the NHS Estate in England, Wales and Scotland - impact of NHS reforms on NHS estate rationalisation and upkeep.
  • Overview of the Primary Healthcare Estate - Future of GP premises under the new Health Act.
  • Healthcare Spending and Investment in the UK - NHS Funding in Wales, Scotland and Northern Ireland, 2012 Autumn Statement, NHSCB budget.

PRIVATE ACUTE HEALTHCARE SECTOR IN THE UK

  • Private partnership with the NHS and analysis of private and corporate providers in the NHS.
  • Acute private hospital provision and leading providers.
  • Private Healthcare companies - key players, market size, including Major groups; Retail Outlets moving into primary healthcare; Private Healthcare Groups and Property/ Investment Companies specialising in GP and primary care premises investment and development.
  • Private Dental Care.

CONTRACTORS OUTPUT IN THE HEALTHCARE SECTOR

  • Analysis of Total New Work Construction Output - Output by Sector and for 2013 and Beyond.
  • Construction Output in the Healthcare Sector - 2007-2017 - factors influencing forecasts.
  • Healthcare Construction Work Pipeline - key funding streams (PFI/PPP P21, P21+), budgets to 2017 and beyond, number of schemes.
  • Capital Expenditure in NHS 2010-2015 - England, Scotland, Wales and N. Ireland - key developments.

PROCUREMENT OF HEALTHCARE CONSTRUCTION WORK

  • Size of the PFI Healthcare Market and Progress of Schemes to Date.
  • Future of Healthcare PFI (Private Finance 2) - key schemes, values.
  • Alternative Models to PFI in the Healthcare Sector. - key funding streams.
  • Overview of NHS LIFT/ExpressLIFT/Hub Initiative Scotland/Procure21 & Procure21+/ Designed for Life: Building for Wales Framework/Frameworks Scotland - Budgets, Pipelines, Progress to Date, Forecasts.
  • NHS LIFT and P21 construction pipelines 2012-15 - values, schemes, status, players
  • Other Finance and Procurement options for NHS Clients - LABVs, Joint Ventures, Surplus Land - open up the market considerably to smaller firms and suppliers.

CONSTRUCTION SUPPLY IN THE HEALTHCARE SECTOR

  • Key Construction Companies in the Healthcare Sector - recent projects.
  • Key Consortia in Healthcare Sector - key players.
  • Healthcare Developers and Investors.
  • Current construction opportunities and tenders in the Healthcare Sector.

SUMMARY OF REPORT CONTENTS

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Under major reforms proposed in the Health and Social Care Act, the NHS is undergoing the most dramatic change in its history, which will see the management of the NHS, including the estate, decentralized as more power is handed to GPs and clinicians. In addition, with NHS capital spending now drastically reduced the process of funding new hospitals and primary care facilities is set to change over the coming years. Under the new Health and Social Care Act, responsibility for commissioning services will now be devolved to local groups of GP practices, known as Clinical Commissioning Groups (CCGs). CCGs are now expected to be in place by 1st April 2013 to replace Primary Care Trusts (PCTs). GPs and other primary care providers now have to consider new models for service delivery, practice based commissioning and the procurement of capital projects.

The broader policies of developing GP-led commissioning will encourage greater co-operation between private and public care providers and, as financial constraints continue and public sector capital becomes more difficult to obtain, the procurement of services to the NHS, including construction, will increasingly look towards increased partnership with the private sector.

These increased powers are expected to form the basis of a new system for procuring healthcare estate facilities, reducing the need for direct capital funding from the public purse. As a result of these reforms, the nature of future work in the healthcare sector is likely to change to reflect a more rationalized estate, with the majority of healthcare clients reviewing their healthcare estates in a bid to achieve efficiency savings.

Industry response to the new Act indicates a move away from secondary healthcare developments such as large PFI hospitals, towards upgrading, refurbishing and extending the primary healthcare estate, with around a quarter of NHS trusts looking to increase the size of their estates through extensions to existing premises over the next 2-3 years. Indeed, the Department of Health (DH) has said that in future there will be more emphasis on improving existing premises rather than building new ones.

Despite reforms and austerity measures, investment in the NHS still remains a priority for the Government, with revenue funding for the NHS protected until 2015, although this includes a 17% decrease in capital spending over the period. The DH is one of the largest departments in government and one of the largest clients for construction work in the Health sector, with a capital budget of around £4.4bn in 2012-13 and 2013-14. However, with the squeeze on health capital funding, many large-scale capital schemes are expected to suffer, with contracts taking longer to reach financial close. This could lead to proposals being scrapped or trusts having to consider smaller refurbishment schemes rather than new-builds.

Construction output in the health sector has been subject to volatility in recent years with extraordinary growth in 2008 (£5.9bn) and sharp annual decline ever since. Short-term prospects for health construction output are likely to continue the downward trend in output reflecting a continuing squeeze on capital budgets and current forecasts for 2012 indicate further decline of 7-8% and value of around £3.2bn. This will be followed by further output declines in 2013 and 2014 when the value is forecast to be around £3.1bn.

Key to this pessimistic short-term forecast is the significant cuts to capital budgets faced by the health sector 2011-16 with declining new orders underpinning this decline. Output is forecast to remain static at around £3.1bn in 2014-16, but still approximately 47% down on the 2008 peak.

Going forward, the healthcare market is likely to open up further, with new entrants, new investment, and a range of different procurement solutions. The reduction in capital together with the cost of estate stock through routes such as PFI and PPP means it will be important for new funding models to be developed. Although PFI will still have a role to play it will be used less as alternative models of procurement come through.

Table of Contents

CONTENTS and LIST OF TABLES & CHARTS

1 INTRODUCTION

2 SUMMARY AND FUTURE PROSPECTS

3 PUBLIC SECTOR HEALTHCARE IN THE UK

  • 3.1 OVERVIEW AND NEW STRUCTURE OF THE NHS
    • 3.1.1 Health & Social Care Act 2012
    • 3.1.2 Government Reform of the NHS
    • 3.1.3 New Providers and Clients under the new NHS Structure
  • 3.2 THE NHS IN AN AGE OF AUSTERITY - ESTATE RATIONALISATION
    • 3.2.1 England
    • 3.2.2 Scotland
    • 3.2.3 Impact of the Health & Social Care Act on the NHS Estate
    • 3.2.4 Future of GP Premises
  • 3.3 HEALTHCARE SPENDING IN THE UK
    • 3.3.1 NHS Funding - England
    • 3.3.2 NHS Funding - Scotland
    • 3.3.3 NHS Funding - Wales

4 PRIVATE ACUTE HEALTHCARE SECTOR IN THE UK

  • 4.1 OVERVIEW AND SIZE
    • 4.1.1 Partnership with the NHS
  • 4.2 LEADING PRIVATE HEALTHCARE PROVIDERS
    • 4.2.1 Private Healthcare Companies
    • 4.2.2 Private Dental Care

5 CONTRACTORS OUTPUT IN THE HEALTHCARE SECTOR

  • 5.1 TOTAL CONSTRUCTION OUTPUT
    • 5.1.1 Value of Total Output - Construction New Work
    • 5.1.2 Output by Sector
  • 5.2 OUTPUT FOR 2013 AND BEYOND
  • 5.3 CONSTRUCTION OUTPUT IN THE HEALTHCARE SECTOR
    • 5.3.1 Outlook for Healthcare Construction Work
    • 5.3.2 Healthcare Construction Pipeline
  • 5.4 CAPITAL EXPENDITURE IN THE NHS
    • 5.4.1 England
    • 5.4.2 Scotland
    • 5.4.3 Wales
    • 5.4.4 Northern Ireland

6 PROCUREMENT OF HEALTHCARE CONSTRUCTION WORK

  • 6.1 PFI
    • 6.1.1 Overview & Size of the PFI Healthcare Market
    • 6.1.2 Future of Healthcare PFI under the Coalition Government
    • 6.1.3 Alternative Models to PFI in Healthcare
  • 6.2 PROCUREMENT ROUTES FOR GPS AND PCTS
    • 6.2.1 Future of Procurement under the new NHS Reforms
    • 6.2.2 NHS LIFT
    • 6.2.3 Express LIFT
    • 6.2.4 Hub Initiative Scotland
    • 6.2.5 Procure21/Procure21+
    • 6.2.6 Designed for Life: Building for Wales (P21 in Wales)
    • 6.2.7 Frameworks Scotland
    • 6.2.8 Other Finance and Procurement Options for NHS Clients

7 CONSTRUCTION SUPPLY IN THE HEALTHCARE SECTOR

  • 7.1 OVERVIEW
  • 7.2 KEY CONSTRUCTION COMPANIES AND CONTRACTORS IN HEALTHCARE
  • 7.3 KEY CONSTRUCTION CONSORTIA IN THE HEALTHCARE SECTOR
  • 7.4 HEALTHCARE DEVELOPERS AND INVESTORS
  • 7.5 OPPORTUNITIES/TENDERS

TABLES AND CHARTS

  • TABLE 1 SUMMARY OF HEALTHCARE SECTOR BUDGETS AND MAJOR CAPITAL SPENDING PROGRAMMES 2011-2015
  • TABLE 2 NEW OPERATING STRUCTURE OF NHS - TRANSITION TIMETABLE
  • CHART 3 STRUCTURE OF THE NHS - BEFORE AND AFTER HEALTH & SOCIAL CARE ACT
  • TABLE 4 AUTHORISED CLINICAL COMMISSIONING GROUPS (CCGS) - AS AT DECEMBER 2012
  • TABLE 5 TOTAL SIZE OF NHS ESTATE BY FUNCTION (SQ. M.) 2011-12 (GIFA, OCCUPIED/UNUSED, BACKLOG MAINTENANCE ETC)
  • CHART 6 NHSSCOTLAND ESTATE - AGE OF PROPERTY 2011 (%)
  • CHART 7 VALUE OF UK NHS EXPENDITURE 2005 - 2015 (£BILLION)
  • TABLE 8 UK NHS PRIMARY CARE TRUST REVENUE SPENDING ALLOCATIONS 2006-2013 (£BN)
  • TABLE 9 TOTAL HEALTHCARE SPENDING SCOTLAND 2010-15 (£M)
  • CHART 10 PRIVATE ACUTE HEALTHCARE MARKET - % BY SECTOR (£BN) 2010-11 (ACUTE HOSPITALS, MENTAL HEALTH, NHS COMMISSIONING)
  • TABLE 11 MAJOR NHS HEALTHCARE CONTRACTS AWARDED TO THE PRIVATE SECTOR IN 2012 - KEY OPERATORS, TRUSTS, CONTRACT VALUES
  • TABLE 12 LEADING UK PRIVATE HOSPITAL PROVIDERS 2012
  • TABLE 13 20 LEADING PRIMARY HEALTHCARE PROVIDERS BY NUMBER AND TYPE OF SURGERIES OWNED
  • TABLE 14 MAJOR DENTAL COMPANIES IN THE UK BY NUMBER OF PRACTICES IN 2010 AND 2012
  • CHART 15 NON-DOMESTIC CONSTRUCTION OUTPUT (UK) 2007 TO 2017 - BY VALUE (£BN AT CURRENT PRICES)
  • CHART 16 VALUE OF CONSTRUCTION OUTPUT NEW WORK BY SECTOR - % BY VALUE 2012
  • TABLE 17 CONTRACTORS OUTPUT OF HEALTHCARE SECTOR WORK (PUBLIC/PRIVATE) 2007-2012 (£M)
  • CHART 18 HEALTH CONSTRUCTION OUTPUT FORECASTS 2007 TO 2017 - BY VALUE (£BN AT CURRENT PRICES)
  • TABLE 19 HEALTHCARE PROJECTS: FORWARD CONSTRUCTION PIPELINE 2012-2020 - SCHEME TYPES, CAPITAL VALUES, STATUS, START/COMPLETION DATES ETC
  • TABLE 20 NHS CAPITAL SPENDING - 2007-2015 (£BN)
  • TABLE 21 HEALTHCARE CAPITAL SPENDING SCOTLAND 2010-15 (£M)
  • TABLE 22 HEALTHCARE CAPITAL SPENDING WALES 2010-15 (£M)
  • TABLE 23 HEALTHCARE CAPITAL SPENDING NORTHERN IRELAND 2010-15 (£M)
  • TABLE 24 CURRENT PFI INVESTMENTS (BY GOVERNMENT DEPARTMENT)
  • TABLE 25 PLANNED PFI HOSPITAL SCHEMES - BY PROJECT, STAGE OF DEVELOPMENT AND CAPITAL VALUE (AS AT JANUARY 2013)
  • TABLE 26 PROCUREMENT ROUTES AVAILABLE TO GP- LED AND PCT-LED SCHEMES - PFI, CONVENTIONAL, P21, LIFT
  • CHART 27 CAPITAL INVESTMENT IN NHS LIFT 2004-2012 BY VALUE (£M AT CURRENT PRICES)
  • TABLE 28 STATUS OF LIFT AND EXPRESSLIFT SCHEMES 2012
  • TABLE 29 NHS LIFT: FORWARD CONSTRUCTION PIPELINE 2012-2015 -PROJECTS, CAPITAL VALUES, STATUS, FUNDING SOURCE
  • TABLE 30 HUB INITIATIVE SCOTLAND - HUBCOS - KEY PARTNERS, CAPITAL VALUES
  • TABLE 31 HUB INITIATIVE SCOTLAND - HEALTHCARE PROJECTS IN DEVELOPMENT - CAPITAL VALUES, COMPLETION DATES
  • CHART 32 P21/P21+ CAPITAL VALUE OF SCHEMES IN DEVELOPMENT 2011-12 TO 2014-15
  • TABLE 33 PROCURE21 FORWARD CONSTRUCTION PIPELINE 2012-2015 (NUMBER & VALUE OF SCHEMES)
  • TABLE 34 PROCURE21+ FORWARD CONSTRUCTION PIPELINE 2012-2015 (NUMBER & VALUE OF SCHEMES)
  • TABLE 35 FRAMEWORKS SCOTLAND: REGISTERED HEALTHCARE PROJECTS (AS AT JANUARY 2013) - SCHEME TYPE, CAPITAL VALUES
  • TABLE 36 HEALTH SECTOR ANALYSIS - TOP CONTRACTORS BY VALUE OF PROJECTS WON (£M) 2012/2013 AND PREVIOUS HEALTHCARE EXPERIENCE
  • TABLE 37 MAJOR CONSORTIA AND SUPPLY CHAIN/FRAMEWORK PARTNERS IN THE HEALTH SECTOR - ENGLAND, SCOTLAND, WALES
  • TABLE 38 PRIMARY HEALTHCARE DEVELOPERS & INVESTORS BY NUMBER OF PRIMARY CARE PREMISES OWNED
  • TABLE 39 HEALTHCARE PROJECTS IN PIPELINE 2013
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