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Healthcare construction industry weathers the storm

Government capital investment provides opportunities

The value of health project planning approvals is growing in a number of areas
The value of health project planning approvals is growing in a number of areas

The healthcare construction sector is continuing to weather the storm, with the Government’s New Hospitals Project, and the increase in activity seen throughout the Coronavirus pandemic, helping to keep the marketplace afloat, according to a new report.

Glenigan’s recently-published UK Construction Industry Forecast 2022-2023 report points to a 3.8% real-term growth rate in NHS capital funding as key to supporting the construction sector in the coming months.

This is supported by the Government’s £4.2bn increase in health capital announced in the last Spending Review.

And it comes hot on the heels of previously-announced plans to build 40 new hospitals by 2030 and upgrade more than 70 others over the same period.

Glenigan’s economics director, Allan Wilen; and senior economist, Rhys Gadsby, said in the report: “The Nightingale temporary hospital programme added a significant boost to health sector project starts in 2020, which grew by a total of 37% against 2019 performance.

“And, although the value is projected to slip back by 7% in 2021, project starts are anticipated to remain very high compared with pre-pandemic levels.”

A strong performance

The value of health detailed planning approvals fell 7% in 2018, the report states, following a strong performance during the previous year.

Encouragingly, though, health project approvals have increased since then, with rises of 3% in 2019 and 32% in 2020.

And they remained high during 2021 to October, rising 9% against the previous year.

“The additional government funding promised in the Spending Review should feed through to sector activity towards the end of the forecast period,” the report states.

“Project starts are forecast to fall slightly during 2021, but remain high compared with any year prior to the pandemic.

“And we expect project starts to increase 5% in 2022 and 4% in 2023 as new projects come forward and as NHS trusts develop and implement their investment programmes.

“By the end of the forecast period, we expect project starts to surpass the strong performance experienced in 2020.”

Disruption in the supply chain

The health and civil engineering sectors have both seen additional funding over recent months and are helping the construction sector to recover from both COVID-19 and the knock-on effect of Brexit.

The report states that, across the majority of sectors, construction activity has moderated due, in part, to material and labour supply issues.

“Post-Brexit customs regulations and non-tariff barriers continue to disrupt supply chains both for the construction industry and across the wider UK economy,” it adds.

“Brexit and the pandemic have also intensified the labour shortages, both in construction and supporting industries such as logistics.

“And this is expected to disrupt the economic recovery from the pandemic.”

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