A key driver for the Healthcare Construction market is the NHS’ future vision, structure and funding for capital projects. In the October 2021 Budget and Spending Review, it was announced that the NHS England budget will grow from £136.1bn in 2021/22 to £162.6bn in 2024/25, this is an average real term increase of 3.8% per year.
Construction output in this sector declined by 37% between 2016 and 2020. There is an ongoing shift from hospital bases provision to a more community-based model. While the forecasts currently suggest there will be market growth between 2021 and 2025, it is not enough to compensate for the decline over the past five years.
Ozge Celik Russell, Researcher Manager at AMA Research and editor of the Healthcare Construction market report explains “In the NHS, the shift of focus away from hospital-based provision towards a community-based model of care continues. This transforms primary care services in line with the NHS Five Year Forward View and the NHS Long Term Plan which creates opportunities for smaller value projects to provide extensions, reorganization and refurbishment of existing primary care facilities.”
With the Government deciding to axe PFI (Private Finance Initiative Schemes) and PF2 (Private Finance 2) for infrastructure projects; although many contracts are due to expire over the next decade, it is confirmed that all existing PFI contracts will be honoured, noting that some of which will run into the 2040s.
Currently the main healthcare construction procurement programmes in the UK are NHS LIFT/ExpressLIFT, the HUB Initiative Scotland, Frameworks Scotland, ProCure22 (until the end of June 2022), ProCure23 (starts in July 2022), NHS Building for Wales Frameworks.
Between 2016 and Q3 2021, in terms of the type of contracts awarded, public hospitals accounted for the largest share, followed by surgeries, health and medical centres. In 2019 before the Covid-19 pandemic, contract awards for all types of healthcare facilities declined over the previous year’s levels. In 2020, contract awards for private hospitals, surgeries, health and medical centres and veterinary surgeries and hospitals increased significantly while the value of contract awards for public hospitals remained stable.
Q1-Q3 2021 activity in contract awards suggests that it will be a strong year in healthcare specifically in terms of public hospitals and hospices, nursing and psychiatric homes. Going forward, output from public hospitals and surgeries, health and medical centres will continue to dominate the total construction output in the healthcare sector.
Since 2016, projects for public hospitals and surgeries, health and medical centres constituted on average 80% of the contract awards in the healthcare sector by value. On a regional basis, the London, East of England and South East lead the forward planning approved pipeline of healthcare work, with 25%, 23% and 12% worth of schemes respectively.