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News - September 2018

Construction activity takes a nosedive

Construction activity takes a nosedive

The healthcare construction sector has seen a worrying drop in contracts over the summer, reversing a period of growth seen earlier this year.

July was the worst month for contract activity this year within the healthcare sector, with evidence of a ‘significant downward trend’ into Quarter Three, according to the latest edition of the Economic & Construction Market Review from industry analysts, Barbour ABI.

Contract awards for the month were a worrying 43.9% lower than in June.

And the month’s overall value of £88m, based on a three-month rolling average, is a new low point for the sector at 33.8% lower than in July 2017.

According to the report, for the three months to July 2018, total medical and health sector contract awards values were £453m - a decrease of 21.6% on the

previous quarter, but 45.9% higher than the same quarter in 2017.

The region with the largest share of contract awards in July was London, at 43.6%, an increase of 25.7% on July 2017, mainly due to the £12m expansion of the intensive care unit at the Chelsea and Westminster Hospital, awarded to McLaughlin & Harvey Construction.

The second-largest region, and only other area with any significant activity share, was the North East, with a 23.7% share, including an estimated £17.5m ambulatory care extension to the Specialist Emergency Care Hospital in Cramlington, which has been awarded to McAvoy Group.

In terms of types of project, public hospitals accounted for the largest share, at 86%; with surgeries and health and medical centres the only other with any significant activity, taking a 9% share.

Across all sectors, commercial and retail projects saw the biggest jump in activity, with a 67% spike in contract value compared to the previous month. Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “While it’s encouraging that the total value of construction contracts increased in July, the sector is still considerably underperforming compared with the figures seen in 2016 and 2017.

“Part of the issue could be attributed to the lack of ‘mega projects’, with Brexit also playing its part as confidence continues to fall and developers and investors hold back on big construction investments.”

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