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13th March 2012
Amid the debate surrounding the future of the NHS, latest Glenigan figures reveal that construction on Hospitals and other medical facilities increased last year. James Abraham, an Economist at Glenigan, takes a closer look at the key trends.
As the government’s Health Bill is considered by the House of Lords, and ahead of this month’s Budget, there has been much debate surrounding the future of the NHS. The construction industry had been braced to absorb a large drop in the value of health related activity in England, as the Department for Health’s capital budget was cut by around a fifth between the 2009-10 and 2011-12 financial years.
However, over 2011 Glenigan recorded an 8% growth in the underlying value of health project starts. This increase was driven by two key types of facilities: hospital work and nursing home construction. In addition, the value of building became increasingly concentrated in the South of the England, with the North of England, Scotland and Wales suffering falling levels of project starts.
The underlying value of hospital projects (which excludes schemes worth £100m or more) increased by 9% last year. The majority of these projects were publicly funded, although some were funded through PFI arrangements. In addition, the underlying value of nursing home increased by 41% over 2011 compared to 2010. This was largely thanks to investment from the private sector, such as the £20m spent by the Anchor Trust to refurbish and extend the West Hall home in Surrey.
However, this wasn’t indicative of how the rest of the health sector faired; there was a 22% decline in the value of health centres and surgeries starting on site. This was caused by a dramatic drop in public funds between 2009 and 2011; the value of private sector projects rose over the same two years.
The majority of health projects which started last year were in the south of the UK, a regional split which became more pronounced than in 2010. The underlying value of health project starts in London, the South East and South West of England increased by 68% in 2011, while the growth figure for the Midlands and East of England was 29%. This was in stark contrast the trend seen elsewhere, as Wales, Scotland and the North of England saw a decline in building of between a third and two-thirds compared to 2010.
Looking forward to this year, I am highly sceptical that the national growth in health starts will continue. The underlying value of planning approvals fell by 24% over 2011, and this is one good indication that the reductions in government funding is restricting the development pipeline. The two growth sectors last year – hospitals and nursing homes – saw large falls in planning approvals, so a retrenchment in project starts is likely to follow.
Of the health projects which do reach start on site, many of them are again expected to be located in the South of England. The underlying value of planning approvals for London, the South East and South West of England increased by 9% in 2011, the only section of the UK to see growth in this measure.
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