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UK Public Sector Property to 2013
Kable - A Division Of Guardian News And Media Limited, April 2009, Pages: 116
Running the public sector property will cost the taxpayer some £20bn in 2009. This represents 8% of the public sector spend - the second highest spend after staff. It is clear that under current government policies, construction will play a significant role as an economic stimulus, and will be used to mitigate the impact of the downturn on employment and spending.
The initial research on this market shows that over the next two years:
- Existing programmes directed at improving the education and health estate are well defined, and will be sustained, if not accelerated;
- The schedule for the 2012 Olympics, which accounts for 20% of annual spend, cannot be changed; and
- The government is already stepping in with additional public funds where there is a shortage of private finance to sustain these initiatives
Long term forecast
However, the long term prognosis is not so bright - either for public sector estates managers or for suppliers. the analyst is predicting that the public sector property spend will decline by 25% in 2012*. Not only will spend decline but so will the size of the estate. A 10% saving in construction and property management spend could contribute £2.5bn towards the Government's efficiency targets (of £10-15bn p.a). On the basis of recent trends, asset disposals might realise and additional £3-4bn p.a. So property savings and sales alone cannot fill the gap in finances. To realise efficiency savings of the required magnitude needs investment in change. Property rationalisation can provide access to the capital funding that will be required to do just that.
This means that the market landscape which emerges post 2011 will differ from both the past and the present in several important respects:
- There will be increased emphasis on leveraging property disposals, and refinancing as a means of funding investment in programmes to transform public service delivery.
- The trend to move responsibility for supply chain management from the public to the private sector will continue, and drive growth in facilities management and in the use of prime contractor relationships. The procurement models to achieve this have already been established in areas such as healthcare and are spreading to local government;
- The use of PFI will decline (because of changing market needs, rather than any shortcomings of the model), and maintenance services will increasingly be delivered indirectly through the supply chain, rather than directly to the public sector;
- The emerging growth areas will build on the experience of more mature programmes, but the drivers and requirements differ. In particular, local collaboration will become more important. Large parts of central government, education, acute healthcare, defence and some parts of the justice system have relatively mature and well-developed estate management strategies in place. Most have some way to run, but less mature programmes in areas such as local government, police, and primary healthcare will begin to play a more important role.
What this report contains
- Description of the current landscape for public sector construction and property management, and estimated current levels of spend in different market segments;
- Outline of the drivers behind public sector expenditure on property, and how these vary across different parts of the public sector;
- Description of the key programmes and initiatives that are under way to modernize the estate, address key policy issues, and build capability in public sector procurement;
- Forecast of the main trends and developments over the next five years, and the implications for suppliers who are operating in this market, or who have aspirations to do so
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