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.
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.
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.