Latest Glenigan Construction Index report reveals a growth in healthcare contract awards and planning approvals
The healthcare construction industry saw a downturn in activity in the first quarter of 2023, but figures show the number of project starts is expected to pick up in the coming months
While the number of healthcare construction projects starting on site has experienced a decline over recent months, a growth in main contract awards and detailed planning approvals is providing a boost to the development pipeline moving forward.
According to the latest Glenigan Construction Index report, £651m worth of health work valued at less than £100m started on site during the first quarter of 2023, down 36% on the previous three months and 42% down on the previous year.
And, unlike the preceding three months, but the same as last year, there were no major projects worth £100m or more starting on site.
Overall, health project starts decreased 24% against the previous quarter and 42% on a year ago.
However, main contract awards – totalling £1.3billion – were up 81% against the preceding quarter and 34% against a year ago.
Public sector starts have disappointed, reflecting capital underspending by several government departments during the 2022/23 financial year
This growth was exclusively due to major projects, which at £614m experienced a 387% increase against the previous quarter.
Underlying contract awards remained flat against the preceding quarter, but stood 27% down against the previous year to total £725m.
But detailed planning approvals hint at an upturn for the industry, totalling £1.9billion – an increase of 77% against the preceding quarter and up 59% on the previous year.
And major project approvals, totalling £961m, quadrupled against both the previous quarter and the 2022 levels.
Underlying approvals, at £1billion, experienced 37% growth compared with the preceding three months, but were 2% down on a year ago.
Unsurprisingly, hospitals accounted for the greatest proportion – 63% - of health work starting on site during the three months to March, despite the value falling 32% against the previous year’s levels to total of £411m.
Nursing home project-starts performed poorly during the period, falling 65% against the previous year to total £89m, which accounted for 14% of all starts; while dental, health, and veterinary centre project starts accounted for 4% of the sector, declining 64% compared with the previous year to total £29m.
And day centre project starts totalled £4m, which was a 48% decrease on last year’s levels, accounting for just 1% of the sector as a whole.
The report also gives insight into the leading contractors and clients within the health sector, with IHP Integrated Health topping the league table of contractors, with projects worth £443m.
The recent Budget has rolled forward some of the departmental underspend to the new financial year, which will hopefully help lift government-funded starts during the remainder of 2023
Also in the top five contractors are Bouygues UK (£310m), Willmott Dixon (£302m), Kier (£242m), and Tilbury Douglas (£240m).
As in the previous report, the Department of Health remains the top client, with 184 projects worth £1.6billion.
The Welsh Government comes next in the table with three projects totalling £612m, followed by Moderna (£150m), Global Mutual (£106m), and UCL The Institute of Ophthalmology (£100m).
Commenting on the figures, Allan Wilen, Glenigan’s economics director, said: “Construction starts fell sharply during the first quarter, as a weak economic outlook and the knock to investor and consumer confidence from last autumn’s mini budget weighed on private sector activity.
“Public sector starts have also disappointed, reflecting capital underspending by several government departments during the 2022/23 financial year.”
“But the recent Budget has rolled forward some of the departmental underspend to the new financial year, which will hopefully help lift government-funded starts during the remainder of 2023.”