Over £9 billion will be spent on education construction and improvement in 2012 according to a new report from MTW Research, with new build and refurbishment activity in schools offering substantial opportunity for growth for manufacturers and contractors targeting this sector.
Following the scrapping of the Building Schools for Future programme, the Government has pledged more than 600 schools will be built or refurbished, with real term increases in the education budget promised each year until 2015. MTW report that a substantial repair backlog coupled with the growing demand for new schools is set to drive the sector in the next few years, with PFI and central funding offering good opportunities for the building products market.
Education spending increased by more than 20% in the last 6 years and despite current austerity measures, funding is set to rise in real terms until 2015 according to the report, with Government expenditure on schools rising by more than £2 billion in the next 4 years. MTW also point to the need for an additional 350 new primary schools each year due to the rapid growth in birth rates, with this also set to grow demand for building products and provide healthy stimulus for the UK construction industry overall.
The 140 page report also identifies and discusses the significant changes in the education sector which took place this month, with funding responsibilities now coming under a new Government organisation. Discussing these changes, MTW said that “The recent changes will significantly impact on how education funding is distributed as well as influencing specification of building products and services. These changes are of vital importance to the UK building industry and its clear that procurement processes will change in the near term.” The report also points out that PFI activity is now under the umbrella of this new funding regime, with a further £2-£3 billion of expenditure to be spent on new school facilities in the next few years.
The research also included analysis of 60 of the largest contractors active in the UK education new build and RMI sector and the report’s prognosis appears positive with these contractors estimated to have achieved a combined turnover of more than £30 billion in 2011. MTW indicate that just under £1 billion will be spent on improving and maintaining UK schools and universities in 2012. Within the £280 million academies refurbishment programme, the report identifies £75 million of spending on projects each worth more than £100,000, underlining the substantial levels of investment ongoing in the education sector.
The controversial policy of universities increasing tuition fees is also highlighted by MTW as a likely stimulus of refurbishment and new build activity in the higher education sector. By 2016, the report forecasts total revenue by universities will reach just under £26 billion, reflecting growth of more than 40% since 2006 when revenue stood at just under £18 billion. In 2012, tuition fees will represent around 30% of income according to MTW, with the UK universities currently recording a surplus of around £1 billion, underlining the healthy condition of the university sector at present. Under these conditions, MTW suggest that new build and RMI activity will increase relatively rapidly as higher education establishments enhance their facilities and accommodation in order to entice students and grow numbers.
Overall, prospects for the education construction and refurbishment sector are positive according to MTW, with short term moderate growth likely to translate into more healthy opportunities from 2013 onwards. The report is available now from MTW Research’s website www.marketresearchreports.co.uk for £565 or by calling 08456 524324.