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Contractors
Output in the Public (Non-Residential) Sector
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In 2007,
overall public sector spending stood at £589bn, a rise of around 7%
on the previous year., with principal areas including the education
and healthcare sectors, backed by leading Government initiatives
such as the Building Schools for the Future programme, Procure21
and NHS LIFT.
Levels of
investment within the public sector tend to be less affected by
fluctuations within the economy and current government policy
indicates commitment to significant investment in areas such as
education and health. |
Since 2000,
Public sector non-residential construction has registered strong growth
averaging almost 20% per annum, reflecting major investment in health and
education. Recent constraints on Government spending however have seen
this strong growth slow since 2005 and new work output
in the public non-residential sector in 2007 rose by just over 2%,
compared to the previous year, to reach £10.1 billion and accounted for
15% of total construction new work.
Although investment in
public services and infrastructure has increased considerably in recent
years, many of the Government targets have now been revised
or missed altogether, with serious delays being experienced in both the
Schools upgrade programme and acute healthcare sector, in particular.
Education accounts for over 50% of public sector non-housing output,
though should still rise strongly in the next 5 years as the Building
Schools for the Future programme recovers from the substantial delays to
date. There has also been some progress made in tackling the repair and
maintenance on schools but the backlog still remains substantial at around
£8bn and existing NHS facilities have a backlog of £3.7bn.
The way in which
government clients fund and procure construction work varies
between departments, but is usually focused on Design & Build, Prime
Contracting and the Private Finance Initiative (PFI).
Departments often use one or more of the three methods across their
construction programmes. Defence Estates, for example, uses all
three methods of procurement and the NHS incorporates Design and
Build and Prime Contracting, PFI, NHS LIFT and the
ProCure21 approach to cover the majority of health construction work.
A large proportion of the schools building programme is expected to use
PFI as its method of delivery.
Many UK building
contractors are now looking to the public sector to provide growth in
the medium to long term and have indicated that they will continue to
target contracts from the Government's ongoing health, education, rail and
road plans.
Public sector output is
forecast to improve slightly over the next three years with better than
expected allocations announced in the 2007 CSR helping to maintain modest
growth in the public sector, with output averaging 2% per annum to reach
£11.2bn in 2012. However while Labour’s commitment to reforms in education
and health continues, the subdued economic climate may threaten the
current high levels of spending on education and health projects in
2008-10, and
public
funding may slow because of financial constraints.
AMA Research’s report “Public
Sector (Non-Residential) Construction Market UK 2008-2012” is
available in hard copy or electronic format for £625 and can be ordered
online at
www.amaresearch.co.uk
or by calling 0871 3103450. |
