Healthcare sector contracts and planning approvals fall as NHS announces £15 billion funding gap
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All is not well in the healthcare sector. Last week, the NHS Confederation – the body that represents 90 per cent of NHS organisations – published a report claiming the service was facing the greatest financial challenge of its entire history.
The report, Dealing with the Downturn: The Greatest Ever Leadership Challenge for the NHS? warned the NHS could face a shortfall in funding of £15 billion over the next decade. This was followed by reports (AJ.11.06.09) that the government is to withhold £500 million of funding for hospital building and refurbishment, in one of the first signs of cuts expected to be forced on the NHS.
In the wake of the reports, architects specialising in the healthcare sector are bracing themselves for a seismic shift in both the scale and type of projects that will be funded.
Joe Biggs, director at P+HS said the shortfall will have a fundamental impact on funding and capital expenditure. ‘We do see the change, from capital spending on building projects to a greater focus on refurbishment than rebuild.’
Biggs added: ‘Capital projects won’t come to a halt but will be downscaled – that’s inevitable. Also there will be far more collaboration between NHS and local authorities.’
Andy Avery, director at MBLA Architects+Urbanists, also anticipates a greater focus on refurbishment. ‘I suspect going forward there will be more consolidation. Some schemes may drop away and there will be a closer look at better utilisation of existing premises.’
Meanwhile Rocco Piliero, director of healthcare at Archial Group, is worried than any cuts in spending will have a detrimental effect on the profession, with specialist firms in particular suffering. ‘There is also the risk of erosion to what amounts to a very specialist assembled skills base among architects and other consultants working in the healthcare sector frameworks.’
However, not all firms are as concerned by news of the NHS funding gap. Sinclair Webster, head of healthcare at HOK, said such cuts could actually benefit the profession. ‘Yes, there are cuts in NHS spending, but HOK doesn’t necessarily see this as a bad thing. Trusts need to rationalise their estates and reduce costs and they need help from architects and designers to do this.’
Richard Nelson, Director of Business Development at Watkins Gray International, also believes their practice will be resilient. ‘We think firms like ours who work internationally in healthcare and who can bring innovative ideas to improve the operational efficiencies of healthcare facilities will hang in there.’
While some architects may be expecting a change of government will alter the situation, according to shadow secretary of health Andrew Lansley, architects should not assume the Conservatives will offer a better solution to the funding gap. Lansley said recently most departments would have to cut budgets by 10 per cent in the three years after 2011 to give real-terms increases to the NHS, schools and foreign aid.
In the meantime, the current government moved to play down the confederation report. In a statement from the Department of Health, health secretary Andy Burnham said: ‘When we came into government in 1997, the NHS was the poor man of Europe. Since then we have tripled funding from £35 billion to over £100 billion, putting the NHS on a strong financial footing… meaning it is well placed to deal with the tough economic times ahead.
‘We agree with the NHS Confederation that there is still great potential for improvements in the way health services are delivered, but this is not a crisis. As the prime minister recently stated to the Royal College of Nursing, the NHS will continue to benefit from real-terms growth year-on-year.’
However, recent figures from construction industry tracker Glenigan confirm that firms should prepare for the worst. In the last three months alone, the 12-month rolling total has dropped from £1.1 billion in March to £853 million in May.
In its recent report, PFI Health – The Definitive Guide, published on 11 May 2009, Glenigan revealed that the value of underlying project starts during the three months to March is 28 per cent down on a year earlier. In addition, the report said that 2008 was notable for a general absence of new major hospital schemes (valued at over £100 million), reflecting a shift in government priorities. During 2008, the value of underlying planning approvals also fell by 23 per cent compared to the previous year.
Some architects remain optimistic, however, about the viability of the sector. Richard Harrington, executive chairman at Nightingale Associates, said that while he is aware the 2011 spending review may commit to less capital spending, he remains ‘reasonably optimistic about the longer-term future for those professionals working in the health sector.’
Architects brace themselves for NHS cuts