Skills shortages, supply chain delays, and Russia/Ukraine conflict a 'blip' the healthcare construction sector can overcome, claims market expert
The Glenigan construction forecast monitors and predicts activity across all sectors, including healthcare
Despite a weakened economy and post-Brexit uncertainty stunting the construction industry’s recovery, experts are predicting an upsurge in healthcare projects in the coming months.
Glenigan’s November 2021 Construction Industry Forecast saw a struggling market, impacted by supply chain delays and skills shortages.
But, speaking to BBH this week, Glenigan’s economics director, Allan Wilen (pictured below), reveals the sector was able to demonstrate its resilience, with some areas actually securing significant growth.
“For the health sector, the future was, and still is, looking bright,” he reveals. >
“This is partly due to the reprioritising of public health in the wake of the pandemic.
“In short, health spend couldn’t have been higher on the political agenda.
A £4.2billion increase in capital investment as part of the government’s Spending Review was welcome news, and plans to build 40 new hospitals by 2030 and upgrade another 70 hospitals over the same time period was proof of its commitment, he added.
Despite ups and downs, the construction industry has been able to hold its nerve and weather the storm before and we believe it can do so again
Other projects such as the Nightingale temporary hospital programme also added a significant boost to health sector project starts and high project starts were anticipated against pre-pandemic levels.
However, no one had expected the dramatic turn of events heading into the start of 2022.
“Geopolitical issues, particularly the Russia-Ukraine War, have exacerbated existing problems, hindering construction output,” Wilen says.
“And the long-standing issue of material shortages, supply chain delays, and rising energy tariffs will have added significant cost increases to overall production and supporting logistics.
“It’s already having a knock-on effect on productivity, and the impact is being felt in healthcare construction.”
Glenigan’s recent April Construction Review saw both project starts and main contract awards decline against the previous year.
A weak economy, post-Brexit uncertainty, skills shortages, supply chain delays, and the Russia/Ukraine conflict have all had an impact on the construction industry
Underlying project starts (£100m and under), performed poorly, totalling £818m and declining 14% on the previous quarter.
And hospitals have borne the brunt of it, with the value of work starting onsite, down by 29% against the previous year to total £501m.
Dental, health, and veterinary construction starts, accounting for 4%, declined by over a quarter (-26%), against the previous year to total £40m.
Wilen said: “Despite ups and downs, the construction industry has been able to hold its nerve and weather the storm before and at Glenigan we believe it can do so again.
“My team and I have complete confidence of a full recovery once we’ve got past the short-term impact.
“Rather than approaching this pessimistically, sector specialists should be taking a ‘glass half full’ perspective, using the current situation as an opportunity to revaluate current supply chain arrangements.
“Time spent reflecting on construction process and procedure could also improve how materials are being used, to drive up sustainability.”
A challenging marketplace is also grounds for a more-imaginative and innovative approach to building, he added.
For now, the challenge lies in getting the shovels in the ground so that healthcare projects can be delivered on budget and on time
“ We’ve seen how increased levels of digital adoption are able to improve the quality and standards of building, allowing companies to take a leaner approach to building. By doing so, they can also minimise waste, so that output can continue and deadlines can be met.
“What is clear is that, despite the disruption from external forces, the health sector has much to be optimistic about.”
The April Construction Review found that a pipeline of detailed planning approvals is set to bolster the sector.
Health detailed planning approvals saw a strong period, increasing 17% on the previous quarter and up 18% on the year before.
Underlying planning approvals (for projects under £100m) also increased 19% during the same period, pushing underlying approvals forward by 7% on the previous year to total £885m.
Major project approvals (over £100m) also saw positivity, with a 110% increase on the previous year to total £220m.
This was as a result of major schemes including a £27m medical research development in Guildford.
With multiple projects on the horizon, we can see that confidence in the health sector is still strong and the current blip is likely to be short lived
Other projects such as the £169m redevelopment of Luton and Dunstable Hospital have also helped boost the numbers for work onsite, increasing 903% against the previous year to total £331m.
Wilen concludes: “With multiple projects on the horizon, we can see that confidence in the health sector is still strong and the current blip is likely to be short lived.
“It will be interesting to see how the sector fairs in quarter two and the second half of 2022, but, for now, the challenge lies in getting the shovels in the ground so that healthcare projects can be delivered on budget and on time.”