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Clogged arteries on health construction

Analysis by Glenigan suggests healthcare construction will be slow in 2009.

An 8 per cent drop in project starts during the final quarter of 2008 means the decline in planning approvals may have already begun to filter through to the value of projects starting on site, suggests Glenigan economics director Allan Wilen.

There is a clear picture on major projects. During 2007 seven large hospital projects, worth a total of £1.7 billion, started on site. Last year only two large hospital projects started on site.

The credit crunch combined with accountancy changes for the treatment of PFI projects are pushing most HNS trusts away from the large private finance deals that characterised the Blair years.

One of the by-products of this is greater responsibility taken by individual trusts for investment, rather than centrally with the Department of Health. According to Glenigan, the East of England, London and the Southwest saw marked declines in the value of underlying construction starts during the course of 2008, while the North-east and the South-east enjoyed a strong rise in project starts.

Wales also recorded a substantial rise in project starts during the year as a whole, despite a general absence of new project starts during the final quarter of the year.

Glenigan forecasts the weakness in the value of underlying health starts in quarter four 2008 will persist during the first half of 2009.

During 2008, the value of underlying planning approvals fell by 24 per cent on a year earlier, a factor we anticipate will act as a brake on new project starts over the coming months.

As a comparison, the value of starts on-site recorded by Glenigan so far in 2009 is £292 million – this fell from a recent high of £2.123 billion in 2008 after a figure of £1.979 billion in 2007.

Although figures for Northern Ireland were incomplete at the time of going to press, last week saw an announcement by Western Health & Social Care Trust in County Londonderry about its £190 million hospital building programme.

Competitive dialogue will close in the summer 2009, final tenders will be received in the autumn 2009 and a preferred bidder is expected to be appointed before the end of the year.