Table of Contents
AMA Research are pleased to announce the publication of the 6th edition of its overview of the Healthcare Construction Market in the UK, focusing on key market trends and major structural change within the NHS and private sectors, which should be of particular interest to healthcare providers and construction professionals involved in the healthcare sector.
Key issues analysed include:
• Government reform of the NHS and implications of the Health & Social Care Act for the construction industry.
• New providers and clients under the new NHS Structure.
• Analysis of Capital Funding to 2016 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.
Particular areas of insight include:
• Potential impact of the government's 'NHS: Five Year Forward View', which outlines what needs to be done between 2015 and 2020 to improve the NHS - a 'blueprint' for the party that wins the 2015 general election, which sets out new models of care and could have significant implications for the NHS and its estate.
• Review of primary healthcare and GP estate and government funding to upgrade premises - GPs now firmly at the core of the NHS.
• 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.
• Shift away from major new build hospital schemes towards local and primary health facilities and refurbishment schemes. ExpressLIFT and P21+ construction pipeline.
• Review of growing involvement of private sector and commercial providers in NHS primary care provision.
Some of the companies included:
Apollo Capital Projects, Assura, Balfour Beatty, Bam Construction, Bouygues, BMI Healthcare, Boots, Brookfield Multiplex, Care UK, Carillion, GPI, GTD (Go To Doc), HCA International, Integrated Dental Holdings Ltd, Interserve, IntraHealth, John Laing, Kier, Laing O’Rourke, Lend Lease, Malling Health, MedicX Fund, Nuffield Health, Octopus Investments, Primary Health Properties, Ramsay Healthcare, Robertson Construction, Ryhurst, Sainsbury’s, Sir Robert McAlpine, Skanska UK, Spire Healthcare, SSP Health, Carlyle Group, Vinci, Virgin Care, Wates, Willmott Dixon.
Key areas covered in the report:
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 and primary healthcare services under the new Health Act and the 'NHS Five Year Forward View'.
• Healthcare Spending and Investment in the UK – primary care spending, NHS funding in Wales, Scotland and Northern Ireland, 2014 Autumn Statement, forecasts 2014-2016.
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 - number of facilities, key contracts.
• 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 - major dental companies/practices.
CONTRACTORS OUTPUT IN THE HEALTHCARE SECTOR
• Analysis of Total New Work Construction Output - output by sector and for 2015 and beyond.
• Construction output in the healthcare sector – 2009-2019 - factors influencing forecasts.
• Healthcare construction work pipeline – key funding streams (PFI/PPP P21, P21+), programme budgets to 2017 and beyond, number of schemes, capital values.
• Capital expenditure in NHS – England, Scotland, Wales and N. Ireland – key developments.
PROCUREMENT OF HEALTHCARE CONSTRUCTION WORK
• Size/value of the PFI healthcare market and progress of schemes to date.
• Future of Healthcare PFI (Private Finance 2) – key schemes, values.
• Overview of NHS LIFT/ExpressLIFT/Hub Initiative Scotland/Procure21 & Procure21+/ Designed for Life: Building for Wales Framework/Frameworks Scotland – budgets, construction pipelines, progress to date, forecasts.
• NHS LIFTExpress and P21+ construction pipelines 2014-20 – values, schemes, status, players etc.
• 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.
The report reviews recent changes and provides insight on forward plans, including capital spending in the healthcare sector, key issues for the construction industry and anticipated opportunities for healthcare construction work over the next few years.
Having reached its peak at £5.9bn in 2008, health sector construction output has subsequently declined by 48% to around £3bn in 2014. Cuts to the capital budget initiated by the Government since April 2011 have had a significant impact on health sector output and the outlook remains one of moderate output improvements to 2019. However, the health sector is one of the largest clients for construction work.
In recent years the mix between public and private sector output has changed, with the public sector share having experienced significant fluctuations due to budget cuts and changing attitudes towards the use of PFI and other private sector input. Overall healthcare construction output remained in decline in 2014, but the private sector accounts for a smaller share of total output continuing the downward trend experienced since 2008.
With more healthcare services being driven out of the acute setting and into the primary sector, GPs are now very firmly at the core of the NHS and the emphasis is now upon the upgrading and refurbishment of the GP estate. Investment in the primary care estate has generally lagged behind that in the secondary or acute sector, however, in the 2014 Autumn Statement, the Chancellor announced a £1bn funding package for investment into GP facilities which will help upgrade current facilities to deliver additional services and care outside hospitals.
The future focus of NHS services will be on moving care within or closer to home, more regional services and the closure of some hospitals. As a result, there is a continued move away from secondary healthcare developments such as large PFI hospitals, towards upgrading, refurbishing and extending the primary care estate, with more emphasis on improving existing premises rather than building new ones.
The broader policies of developing GP-led commissioning have undoubtedly led to greater co-operation between the private and public sectors and more work with private providers and their construction teams. As financial constraints continue, the procurement of services to the NHS, including construction, are increasingly looking towards increased partnership with the private sector.
Established methods of delivery of new capital developments, such as PFI, LIFT, Procure 21+ and Express LIFT are now undergoing change under NHS organisational reforms. As financial constraints continue and public sector capital becomes more difficult to obtain, the procurement system is increasingly looking towards partnering with the private sector in the development of capital projects. This is also leading to the co-location of several public services from a single building including GP services, minor injuries and surgery, diagnostics, therapies, optometrists, dentistry, social and community care. The main challenge for contractors will be to reduce build costs and develop standardised designs and techniques to help NHS trusts achieve capital efficiencies.
As indicated previously, the period of large hospital developments has now all but closed with more recent emphasis being placed on smaller, local projects such as smaller community hospitals, and combined GP surgeries/health centres. The majority of health construction projects are now likely to be procured under P21+, with a focus on smaller, refurbishment projects and rationalisation of NHS estates, as outlined elsewhere in this report.
Health sector output is forecast to pick up slightly in 2015 with value increases of around 4%, though forecasts indicate moderate annual rates of growth to 2019, when output is forecast to reach £3.6bn, underpinned by the recent cuts to capital budgets and the current focus on improving/maintaining existing facilities. Although the latest trend for new orders has been upwards this is unlikely to result in a rapid upturn in output in the medium-term, particularly while budgets remain under pressure.
However, there remains an ongoing programme to build new/replacement clinics and surgeries on a local level, which is likely to underpin output into the medium-term and budgets in the sector remain ring-fenced as announced in the 2014 Autumn Statement. A slight increase in the NHS capital expenditure budget in 2015-16 to £4.7bn may help to sustain output growth in 2016 and beyond as financial pressures on trusts to commission new facilities and upgrade existing ones begin to ease. However, the medium-term prospects for health sector output are still severely constrained by continuing low levels of investment. Key to the future performance of the health sector is the changing focus from larger-scale regional provision to smaller, locally based services based on LIFT/P21+ procurement programmes.
In contrast to new build, health sector RMI is forecast to be more buoyant as plans for service delivery on a local level are pursued. Into the longer-term the issue of an ageing population could boost demand for both new build and RMI due to need to increase nursing/care home places. Whilst health spending for 2016-17 and 2017-18 has not yet been announced, the health budget continues to be under pressure, with the additional demands on the service, combined with rising input costs and the potential for a change of government in 2015 could also alter the focus of health sector capital expenditure.
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