Increased investment in the NHS is set to be a key priority for the new government which bodes well for the medium-term outlook for new construction work in the health sector.
The Labour manifesto noted: “…the NHS estates are in a state of disrepair after years of neglect. Labour is therefore committed to delivering the New Hospitals Programme.”
Although progress on the New Hospitals Programme has so far been slower than hoped, the investment involved in new construction remains huge and much of the work has yet to materialise.
The timing of an upturn in health-related construction is uncertain at this stage. Glenigan’s new Construction Industry Forecast 2024-2026 predicts that the value of underlying health starts will rise by 14% this year. A post-election Spending Review may mean project starts ease off next year before increased capital funding fuels renewed 4% growth in 2026.
Under the previous government’s Hospital 2.0 programme, a recent National Audit Office report envisaged the delivery of 32 new hospitals by 2030 with a further eight set to be completed beyond then. The programme also involves work on a further five hospitals with RAAC problems.
The report also highlights the scale of the new investment. It notes that the Treasury’s maximum funding for the scheme 2025/26 – 2030/31 will be £18.5 billion (subject to future spending reviews), taking the total to £22.2 billion.
The NAO report also identified a further £10.2 billion backlog of maintenance work needed across the NHS hospital estate in 2021-22, up from £4.7 billion in the past seven years.
Pace of activity picks up
The pace of activity in the health sector has picked up recently as schemes have progressed to site. Glenigan data points to a 35% increase in the value of health sector project starts in the first four months of 2024, compared to a year earlier.
The pipeline is also looking brighter, particularly in the south of the country. The value of underlying health project approvals in the South East is on course to reach £900 million this year, up from around £850 million in 2023. Meanwhile, approvals are set to increase to over £700 million in the East of England and to rise significantly in the West Midlands (to over £400 million) and in the South West (to over £450 million).
The major UK contractors also see promise in the health sector. Both Morgan Sindall and Laing O’Rourke have recently highlighted NHS projects as key features in their order books. Last August, Laing O’Rourke won the contract to build the new £750 million University Hospital Monklands in Lanarkshire, having completed the Royal Liverpool University Hospital and phase 1 of the Royal Sussex County Hospital in Brighton.
Glenigan data includes details on numerous significant health sector projects of varying sizes that are in the pipeline around the country.
For example, outline plans have been granted and work is due to start next year on the £650 million Leeds General Infirmary Redevelopment (pictured) as part of the Hospital 2.0 programme. The scheme, which is at the pre-tender stage and involves a floor area of almost 54,000 sq m, is set to run for 44 months (Project ID: 18366238).
Further south in Croydon, detailed plans have recently been granted for an £85 million Community Diagnostics Centre for Croydon Healthcare NHS Trust. Work on the scheme, which is at the pre-tender stage and covers a floor space of 800 sq m, is due to start later this summer (Project ID: 06449458).
