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News archive - March 2017
Moving on up - market outlook
Over the past 15 years the healthcare sector has seen major investment in the estate, with the replacement of many hospitals up and down the country with new, state-of-the-art, purpose-built facilities, largely funded through multi-million-pound PFI deals.
But, over the past five years, the scale of projects has declined, with work concentrating instead on the less-costly refurbishment and expansion of existing hospital buildings, particularly improvements around sustainability and carbon reduction.
The focus has also shifted from the acute sector to investment in primary and community care facilities, including GP surgeries, mental health centres, and specialist care facilities, in particular dementia care units.
And a huge amount of mostly-private money is being spent on community care for the elderly, such as the development of extra care units, nursing homes, supported living schemes, and dementia care facilities.
The latest Barbour ABI data shows that just under 120 projects have been confirmed within the medical and healthcare sector, ranging from the Royal Brompton Hospital redevelopment at £350m; to Salisbury District Hospital’s new obstetric theatres refurbishment at £100,000. There are also a number of much-smaller schemes involving single wards or clinics.
The same number of projects are showing at the outline planning stage, prior to works being approved and beginning on site; and more than 200 are at the pre-tender stage.
The National Infrastructure and Construction Pipeline - KPMG Analysis document reveals a £38.9billion jump in the value of UK Government infrastructure and construction pipeline since March 2016. And 60% of the £502billion pipeline value is predicted to be spent within this term of Parliament by 2020.
In the pipeline
The pipeline contains over 700 projects and programmes across 15 sectors and 14 regions. Of those 15 sectors £2.9billion is being spent in the health sector - 1% of the overall activity - with the addition of the £4billion recently-announced ProCure22 framework, which will run for the next four years (see page 7).
Also focusing investment is the Government’s General Practice Forward View document, which sets out the importance of investment in premises and technology to enable transformation in general practice.
The resulting Estates and Technology Transformation Fund is a multi-million programme to accelerate development of primary care infrastructure. Additional capital will also be invested in general practice, which means overall total investment in capital assets up to 2020/21 of £900m.
Typical schemes include improvements or extensions to existing facilities, refurbishment of unused or underutilised premises to increase clinical capacity, construction of new premises including relocation to facilities improved primary care access or to accommodate a wider range of services, and implementation of supportive IT systems.
And, not only has the UK still got a lot to offer, but companies with experience in delivering healthcare schemes, or with innovative building products to sell, are finding their expertise is being sought overseas.
For example, the UK’s International Hospitals Group (IHG) and China’s Dalian Wanda Group have deepened their relationship by signing a 20-year joint venture (JV) to operate the first of Wanda’s hospitals, the Qingdao Wanda IHG International Hospital, in Shandong Province.
The JV is 70% owned by IHG and 30% by Wanda and is expected to generate revenues of over RMB 4 Billion (£450m) over the first seven years.
And Proton Partners, which is building the first wave of proton beam therapy centres in the UK recently won the contract to build a new centre in the United Arab Emirates.
In addition, Brexit is expected to have an impact on all construction activity, but KPMG predicts this will be positive.
A spokesman said: “While Brexit has brought uncertainty to the sector; the message from the Government is clear - infrastructure projects should continue as before - with Prime Minister, Theresa May, suggesting the use of UK Treasury-backed bonds to fund urgent projects.”