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Healthcare Construction Market Report - UK 2015-2019

Published: 06/03/2015 / Number of Pages: 96 / Price: £745.00

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Introduction and Overview

AMA Research are pleased to announce the publication of the 6th edition of its overview of the Healthcare Construction Market in the UK, focusing on key market trends and major structural change within the NHS and private sectors, which should be of particular interest to healthcare providers and construction professionals involved in the healthcare sector. The report reviews recent changes and provides insight on forward plans, including capital spending in the healthcare sector, key issues for the construction industry and anticipated opportunities for healthcare construction work over the next few years.

Key issues analysed include:

  • Government reform of the NHS and implications of the Health & Social Care Act for the construction industry.
  • New providers and clients under the new NHS Structure.
  • Analysis of Capital Funding to 2016 and capital funding arrangements under new NHS Structure.
  • Major contractors, consortia, developers and investors involved in the healthcare sector - construction pipelines, budgets, key schemes and players.

Particular areas of insight include:

  • Potential impact of the government's 'NHS: Five Year Forward View', which outlines what needs to be done between 2015 and 2020 to improve the NHS - a 'blueprint' for the party that wins the 2015 general election, which sets out new models of care and could have significant implications for the NHS and its estate.
  • Review of primary healthcare and GP estate and government funding to upgrade premises - GPs now firmly at the core of the NHS.
  • Review of future of main procurement routes and construction programmes - PFI and Private Finance 2 (PF2), LIFT and ExpressLIFT; Hub Initiative in Scotland; Procure21+; Designed for Life: Building for Wales and Frameworks Scotland - construction pipelines, budgets, key schemes and players.
  • Shift away from major new build hospital schemes towards local and primary health facilities and refurbishment schemes. ExpressLIFT and P21+ construction pipeline.
  • Review of growing involvement of private sector and commercial providers in NHS primary care provision.

Some of the companies included:

Apollo Capital Projects, Assura, Balfour Beatty, Bam Construction, Bouygues, BMI Healthcare, Boots, Brookfield Multiplex, Care UK, Carillion, GPI, GTD (Go To Doc), HCA International, Integrated Dental Holdings Ltd, Interserve, IntraHealth, John Laing, Kier, Laing O'Rourke, Lend Lease, Malling Health, MedicX Fund, Nuffield Health, Octopus Investments, Primary Health Properties, Ramsay Healthcare, Robertson Construction, Ryhurst, Sainsbury's, Sir Robert McAlpine, Skanska UK, Spire Healthcare, SSP Health, Carlyle Group, Vinci, Virgin Care, Wates, Willmott Dixon.

Public Sector Healthcare in the UK

  • Overview and new Structure of the NHS - England, Scotland, Wales - government reforms of the NHS and implications of new Health & Social Care Act.
  • New Providers and Clients under new NHS Structure - CCGs, Foundation Trusts, NHSCB.
  • Size and condition of the NHS Estate in England, Wales and Scotland - impact of NHS reforms on NHS estate rationalisation and upkeep.
  • Overview of the Primary Healthcare Estate - Future of GP premises and primary healthcare services under the new Health Act and the 'NHS Five Year Forward View'.
  • Healthcare Spending and Investment in the UK - primary care spending, NHS funding in Wales, Scotland and Northern Ireland, 2014 Autumn Statement, forecasts 2014-2016.

Private Acute Healthcare Sector in the UK

  • Private partnership with the NHS and analysis of private and corporate providers in the NHS.
  • Acute private hospital provision and leading providers - number of facilities, key contracts.
  • Private healthcare companies - key players, market size, including major groups; retail outlets moving into primary healthcare; private healthcare groups and property/ investment companies specialising in GP and primary care premises investment and development.
  • Private dental care - major dental companies/practices.

Contractors Output in the Healthcare Sector

  • Analysis of Total New Work Construction Output - output by sector and for 2015 and beyond.
  • Construction output in the healthcare sector - 2009-2019 - factors influencing forecasts.
  • Healthcare construction work pipeline - key funding streams (PFI/PPP P21, P21+), programme budgets to 2017 and beyond, number of schemes, capital values.
  • Capital expenditure in NHS - England, Scotland, Wales and N. Ireland - key developments.

Procurement of Healthcare Construction Work

  • Size/value of the PFI healthcare market and progress of schemes to date.
  • Future of Healthcare PFI (Private Finance 2) - key schemes, values.
  • Overview of NHS LIFT/ExpressLIFT/Hub Initiative Scotland/Procure21 & Procure21+/ Designed for Life: Building for Wales Framework/Frameworks Scotland - budgets, construction pipelines, progress to date, forecasts.
  • NHS LIFTExpress and P21+ construction pipelines 2014-20 - values, schemes, status, players etc.
  • Other finance and procurement options for NHS clients - LABVs, Joint Ventures, Surplus Land - open up the market considerably to smaller firms and suppliers.

Construction Supply in the Healthcare Sector

  • Key construction companies in the healthcare sector - recent projects.
  • Key consortia in healthcare sector - key players.
  • Healthcare developers and investors.
  • Current construction opportunities and tenders in the healthcare sector.

Report Summary

Having reached its peak at £5.9bn in 2008, health sector construction output has subsequently declined by 48% to around £3bn in 2014. Cuts to the capital budget initiated by the Government since April 2011 have had a significant impact on health sector output and the outlook remains one of moderate output improvements to 2019. However, the health sector is one of the largest clients for construction work.

In recent years the mix between public and private sector output has changed, with the public sector share having experienced significant fluctuations due to budget cuts and changing attitudes towards the use of PFI and other private sector input. Overall healthcare construction output remained in decline in 2014, but the private sector accounts for a smaller share of total output continuing the downward trend experienced since 2008.

With more healthcare services being driven out of the acute setting and into the primary sector, GPs are now very firmly at the core of the NHS and the emphasis is now upon the upgrading and refurbishment of the GP estate. Investment in the primary care estate has generally lagged behind that in the secondary or acute sector, however, in the 2014 Autumn Statement, the Chancellor announced a £1bn funding package for investment into GP facilities which will help upgrade current facilities to deliver additional services and care outside hospitals.

The future focus of NHS services will be on moving care within or closer to home, more regional services and the closure of some hospitals. As a result, there is a continued move away from secondary healthcare developments such as large PFI hospitals, towards upgrading, refurbishing and extending the primary care estate, with more emphasis on improving existing premises rather than building new ones. The broader policies of developing GP-led commissioning have undoubtedly led to greater co-operation between the private and public sectors and more work with private providers and their construction teams. As financial constraints continue, the procurement of services to the NHS, including construction, are increasingly looking towards increased partnership with the private sector.

Established methods of delivery of new capital developments, such as PFI, LIFT, Procure 21+ and Express LIFT are now undergoing change under NHS organisational reforms. As financial constraints continue and public sector capital becomes more difficult to obtain, the procurement system is increasingly looking towards partnering with the private sector in the development of capital projects. This is also leading to the co-location of several public services from a single building including GP services, minor injuries and surgery, diagnostics, therapies, optometrists, dentistry, social and community care. The main challenge for contractors will be to reduce build costs and develop standardised designs and techniques to help NHS trusts achieve capital efficiencies.

As indicated previously, the period of large hospital developments has now all but closed with more recent emphasis being placed on smaller, local projects such as smaller community hospitals, and combined GP surgeries/health centres. The majority of health construction projects are now likely to be procured under P21+, with a focus on smaller, refurbishment projects and rationalisation of NHS estates, as outlined elsewhere in this report.

Health sector output is forecast to pick up slightly in 2015 with value increases of around 4%, though forecasts indicate moderate annual rates of growth to 2019, when output is forecast to reach £3.6bn, underpinned by the recent cuts to capital budgets and the current focus on improving/maintaining existing facilities. Although the latest trend for new orders has been upwards this is unlikely to result in a rapid upturn in output in the medium-term, particularly while budgets remain under pressure.

However, there remains an ongoing programme to build new/replacement clinics and surgeries on a local level, which is likely to underpin output into the medium-term and budgets in the sector remain ring-fenced as announced in the 2014 Autumn Statement. A slight increase in the NHS capital expenditure budget in 2015-16 to £4.7bn may help to sustain output growth in 2016 and beyond as financial pressures on trusts to commission new facilities and upgrade existing ones begin to ease. However, the medium-term prospects for health sector output are still severely constrained by continuing low levels of investment. Key to the future performance of the health sector is the changing focus from larger-scale regional provision to smaller, locally based services based on LIFT/P21+ procurement programmes.

In contrast to new build, health sector RMI is forecast to be more buoyant as plans for service delivery on a local level are pursued. Into the longer-term the issue of an ageing population could boost demand for both new build and RMI due to need to increase nursing/care home places. Whilst health spending for 2016-17 and 2017-18 has not yet been announced, the health budget continues to be under pressure, with the additional demands on the service, combined with rising input costs and the potential for a change of government in 2015 could also alter the focus of health sector capital expenditure.


List of Report Contents

  1. Contents Listing
  2. 1. INTRODUCTION 6
  3. 2. SUMMARY AND FUTURE PROSPECTS 7
  4. 3. PUBLIC SECTOR HEALTHCARE IN THE UK 12
  5. 3.1 OVERVIEW AND STRUCTURE OF THE NHS 12
  6. 3.1.1 Health & Social Care Act 2012 12
  7. 3.1.2 Providers and Clients under the Reformed NHS Structure 13
  8. 3.2 THE NHS IN AN AGE OF AUSTERITY - ESTATE RATIONALISATION 15
  9. 3.2.1 England 15
  10. 3.2.2 Scotland 17
  11. 3.2.3 Wales 19
  12. 3.2.4 Northern Ireland 20
  13. 3.2.5 Future of the NHS and NHS Estate 20
  14. 3.2.6 GP Premises 25
  15. 3.3 HEALTHCARE SPENDING IN THE UK 26
  16. 3.3.1 NHS Funding - England 26
  17. 3.3.2 NHS Funding - Scotland 29
  18. 3.3.3 NHS Funding - Wales 30
  19. 4. PRIVATE ACUTE HEALTHCARE SECTOR IN THE UK 31
  20. 4.1 OVERVIEW AND SIZE 31
  21. 4.1.1 Partnership with the NHS 32
  22. 4.2 LEADING PRIVATE HEALTHCARE PROVIDERS 34
  23. 4.2.1 Private Healthcare Companies 37
  24. 4.2.2 Private Dental Care 41
  25. 5. CONTRACTORS OUTPUT IN THE HEALTHCARE SECTOR 45
  26. 5.1 TOTAL CONSTRUCTION OUTPUT 45
  27. 5.1.1 Construction New Work - Value of Non-Domestic Output to 2019 45
  28. 5.1.2 Output by Sector 46
  29. 5.2 CONSTRUCTION OUTPUT IN THE HEALTHCARE SECTOR 48
  30. 5.2.1 Outlook for Healthcare Construction Work 49
  31. 5.2.2 Healthcare Construction Pipeline 51
  32. 5.3 CAPITAL EXPENDITURE IN THE NHS 53
  33. 5.3.1 England 53
  34. 5.3.2 Scotland 53
  35. 5.3.3 Wales 54
  36. 5.3.4 Northern Ireland 55
  37. 6. PROCUREMENT OF HEALTHCARE CONSTRUCTION WORK 58
  38. 6.1 PFI 58
  39. 6.1.1 Overview & Size of the PFI Healthcare Market 60
  40. 6.1.2 Future of Healthcare PFI 61
  41. 6.1.3 Alternative Models to PFI in Healthcare 62
  42. 6.2 PROCUREMENT ROUTES FOR GPS AND CCGS 62
  43. 6.2.1 Future of Healthcare Procurement 63
  44. 6.2.2 NHS LIFT 65
  45. 6.2.3 Express LIFT 65
  46. 6.2.4 Hub Initiative Scotland 70
  47. 6.2.5 Procure21/Procure21+ 74
  48. 6.2.6 Designed for Life - Building for Wales (P21 in Wales) 80
  49. 6.2.7 Frameworks Scotland 82
  50. 6.2.8 Other Finance and Procurement Options for NHS Clients 85
  51. 7. CONSTRUCTION SUPPLY IN THE HEALTHCARE SECTOR 88
  52. 7.1 OVERVIEW 88
  53. 7.2 KEY CONSTRUCTION COMPANIES AND CONTRACTORS IN HEALTHCARE 89
  54. 7.3 KEY CONSTRUCTION CONSORTIA IN THE HEALTHCARE SECTOR 91
  55. 7.4 HEALTHCARE DEVELOPERS AND INVESTORS 94
  56. 7.5 OPPORTUNITIES/TENDERS 96
  1. Tables & Charts
  2. TABLE 1 SUMMARY OF HEALTHCARE SECTOR BUDGETS & MAJOR CAPITAL SPENDING PROGRAMMES 2013-2016 - EXPRESS LIFT, P21, FRAMEWORKS SCOTLAND, BUILDING FOR WALES ETC. 7
  3. CHART 2 STRUCTURE OF THE NEW NHS (NHS ENGLAND) 12
  4. TABLE 3 TOTAL SIZE OF NHS ESTATE BY FUNCTION - GIFA, LAND AREA, UNUTILISED SPACE, CAP EXP, BACKLOG MAINTENANCE - 2012-13 - 2013-14 16
  5. TABLE 4 NHS SCOTLAND ESTATE - ACUTE SERVICES BY TYPE OF FACILITY, AREA (SQ. M) AND PROPERTY & FM COSTS (£M) - 2013-14 18
  6. CHART 5 NHS SCOTLAND ESTATE - AGE OF PROPERTY 2013-14 (%) 19
  7. CHART 6 VALUE OF UK NHS EXPENDITURE 2006 - 2016 (£BN) 26
  8. TABLE 7 NHS ENGLAND BUDGET 2015-16 - ALLOCATION OF RESOURCES - ANALYSIS BY SECTOR AND PROGRAMME (CCG, PRIMARY CARE, MENTAL HEALTH, PUBLIC HEALTH ETC) 28
  9. TABLE 8 TOTAL HEALTHCARE SPENDING SCOTLAND 2010-16 (£M) 29
  10. CHART 9 PRIVATE ACUTE HEALTHCARE MARKET SIZE - % BY SECTOR (ACUTE HOSPITALS, NHS COMMISSIONING, MENTAL HEALTH - (£BN) 2013-14 31
  11. TABLE 10 MAJOR NHS HEALTHCARE CONTRACTS AWARDED TO THE PRIVATE SECTOR SINCE APRIL 2013 33
  12. TABLE 11 LEADING UK PRIVATE HOSPITAL PROVIDERS 2014 - MARKET SHARES, NO. OF ACUTE , HOSPITALS, BEDS 35
  13. TABLE 12 TOP 25 PRIMARY HEALTHCARE PROVIDERS BY NUMBER OF SURGERIES & OTHER FACILITIES OWNED - 2015 40
  14. TABLE 13 MAJOR DENTAL COMPANIES IN THE UK BY NUMBER OF PRACTICES IN 2012 AND 2015 43
  15. CHART 14 VALUE OF NON-DOMESTIC CONSTRUCTION OUTPUT 2009 - 2019 BY VALUE (£BN AT CURRENT PRICES) 45
  16. CHART 15 VALUE OF CONSTRUCTION OUTPUT NEW WORK BY SECTOR - % BY VALUE 2014 46
  17. TABLE 16 CONTRACTORS OUTPUT OF HEALTHCARE SECTOR WORK (PUBLIC/PRIVATE) 2008-2014 (£M) 48
  18. CHART 17 HEALTH CONSTRUCTION OUTPUT FORECASTS 2009 TO 2019 - BY VALUE (£BN AT CURRENT PRICES) 49
  19. TABLE 18 HEALTHCARE PROJECTS - FORWARD CONSTRUCTION PIPELINE 2014-2020 AND BEYOND - NO. OF SCHEMES, PROCUREMENT PROGRAMME, CAP EXPENDITURE, START/COMPLETION, SCHEME STATUS ETC 52
  20. TABLE 19 NHS CAPITAL SPENDING - 2007-2016 (£BN) 53
  21. TABLE 20 TOTAL HEALTHCARE SPENDING SCOTLAND 2010-16 (£M) 54
  22. TABLE 21 HEALTHCARE CAPITAL SPENDING WALES 2010-16 (£M) 55
  23. TABLE 22 HEALTHCARE CAPITAL SPENDING NORTHERN IRELAND 2010-16 (£M) 56
  24. TABLE 23 CURRENT PFI INVESTMENTS (BY GOVERNMENT DEPARTMENT) - NO. OF PROJECTS, CAPITAL COSTS 59
  25. CHART 24 CAPITAL INVESTMENT IN NHS LIFT 2004-2016 BY VALUE (£M AT CURRENT PRICES) 66
  26. TABLE 25 NHS LIFT - FORWARD CONSTRUCTION PIPELINE 2014-2016 (SCHEMES, STATUS, CAPITAL VALUES, COMPLETIONS ETC) 68
  27. TABLE 26 HUB INITIATIVE SCOTLAND - HUBCOS (AREA, CAPITAL VALUES, TIER 1 SUPPLY CHAIN PARTNERS ETC) 71
  28. TABLE 27 HUB INITIATIVE SCOTLAND - HEALTHCARE PROJECTS IN DEVELOPMENT - CAPITAL VALUES, STATUS AND COMPLETION DATES 72
  29. CHART 28 P21/P21+CAPITAL VALUE OF SCHEMES IN DEVELOPMENT 2011-2020 75
  30. TABLE 29 PROCURE21 - FORWARD CONSTRUCTION PIPELINE 2014-2020 (NUMBER & VALUE OF SCHEMES, STATUS) BY REGION 77
  31. TABLE 30 PROCURE21+ - FORWARD CONSTRUCTION PIPELINE 2014-2020 (NUMBER & VALUE OF SCHEMES, STATUS) BY REGION 78
  32. TABLE 31 DESIGNED FOR LIFE - BUILDING FOR WALES2 - FRAMEWORK PARTNERS 81
  33. TABLE 32 FRAMEWORKS SCOTLAND - REGISTERED HEALTHCARE PROJECTS (NO. AND VALUES OF SCHEMES, STATUS) - BY HEALTH BOARD 84
  34. TABLE 33 LEADING CONTRACTORS IN THE HEALTHCARE SECTOR BY GROUP TURNOVER AND VALUE OF HEALTHCARE PROJECTS WON 2014 (£M) 89
  35. TABLE 34 MAJOR CONSORTIA AND SUPPLY CHAIN/FRAMEWORK PARTNERS IN THE HEALTH SECTOR 92
  36. TABLE 35 PRIMARY HEALTHCARE DEVELOPERS & INVESTORS BY NUMBER OF PRIMARY CARE PREMISES OWNED 95
  37. TABLE 36 HEALTHCARE PROJECTS IN PIPELINE 2015 - CAPITAL VALUES & STATUS 96

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