Featured Sector: Health

Health construction was the weakest performing area of projects starting in 2013 and activity remained subdued during the first half of 2014. The value of underlying project starts fell by 12% during the first half of 2014. However the second half of the year brought some respite, with starts rising by 35% compared to relatively low levels in the same period a year earlier. This took full year growth in starts to 8%.

Though starts then fell back sharply during the first quarter of this year, a rally during the three months to May made the sector one of few bright spots in the industry as construction starts contracted overall. However this rally is not expected to last, with a decline in starts forecast for 2015 as a whole.

There were hopes that the PF2 contract arrangement, the result of the government’s review of the Private Finance Initiative, would allow private investment to fill the void left by declining NHS capital funding. However the use of the PF2 has as yet been far from successful; it is being piloted in Priority Schools Building Programme where its use has been cut back sharply. Comments from (the previous coalition) Government and the Treasury, point to openness to private investment into energy infrastructure, but much less so for social infrastructure projects. This points to sector activity remaining dependent upon direct government investment in NHS facilities, alongside private investment in the smaller private health sector.

Unfortunately NHS capital budgets are being trimmed to meet rising costs elsewhere in the service. In addition there are currently few reasons for private healthcare providers to invest, especially following a drawn out investigation by the Competition Commission into the sector.