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The market for outsourced services in the educaon sector is predicted to reach £1.35bn by 2022, driven by the more integrated approach towards FM procurement. AMA Research looks at the prospects for construcon and the wider building services and FM sector.


EDUCATION BSEE


EDUCATION CONSTRUCTION MARKET REPORT Repairs backlog expected to create opportunities Schools and colleges


£11.2bn, driven by investment in both the school and higher education estate. From 2017 however, forecasts indicate that output will decline slightly over the next three years before returning to growth in 2020 and 2021.


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Demand in this sector continues to be strong and the need for additional school places is expected to exceed 420,000 by 2021.


While capital budgets remain constrained, the need for investment is recognised by the current Government, which announced £23bn of capital investment in the 2015 Spending Review to cover the opening of 500 Free Schools, and provision of over 600,000 additional school places. In the 2017 Spring Budget, it also pledged an additional £320m to help fund up to 140 new free schools as part of plans to increase investment in local infrastructure and relieve pressure on local authorities for increased school places. Building programmes in England’s education sector are being led by the Priority School Building Programme (PSBP), the first phase of which is currently under way and will help rebuild 260 schools. For the second phase, the Government has allocated a further £2bn.


In Scotland, the Schools for the Future Programme, worth £1.8bn, is expected to deliver around 112 schools up to 2019, while in Wales, the main investment programme for the education sector is the 21st Century Schools Building Programme, which aims to upgrade and extend the entire stock of schools in Wales.


uAn esmaon of the split in revenue expenditure being used for FM services within the public sector educaon market in 2016/2017. Source: HESA/AMA Research/Trade Esmates.


Education capital spending is set to fluctuate until 2021, having declined by around 12% between 2016-17 and 2017-18, before rising to £6.1bn in 2018- 19, then falling again in 2019-20. Restricted budgets and limitations


onstruction output in the education sector has seen four years of consistent growth, reaching a peak in 2016 at around


placed on the size of classrooms and overall space in new schools is expected to constrain value growth for construction output into the medium- term. Rising cost pressures for contractors have also delayed the timing for the second phase of the PSBP.


Higher educaon


University construction work remains a much smaller market than the schools and colleges sector. Total construction output in the HE sector, including both private and public work, is forecast to rise to around £4bn by 2021, as UK universities continue to increase investment in new buildings. Refurbishment work is a strong sector for universities due to a backlog of repairs and upgrades to often large and ageing estates and also due to the pressures on institutions to cut the operating cost of their buildings. Rising student numbers have placed additional strain on university infrastructure in recent years, including teaching and residential accommodation. However, in the most recent academic year, student numbers declined driven by the uncertainty for EU students surrounding Brexit and higher tuition fees. Going forward, the impact of potential immigration targets on EU student numbers coming to the UK and fee levels remain key issues of concern. In terms of funding, English universities have seen a 4% decline overall between 2016-17 and 2017-18, with capital funding having declined by over 25% over the period. The environment for university funding has changed dramatically, and as a result, universities are turning to capital markets to fund infrastructure investments. Going forward, higher education sector workloads are expected to be boosted by key long-term capital building programmes as universities seek to invest in research, to address past under-investment and provide additional space for teaching, research and accommodation facilities and to attract higher fee-paying overseas students.


Outsourcing of services in the educaon sector


Opportunities for new service contracts within the education sector in general – and especially for building and maintenance work – were reduced by the cancellation of the BSF programme early in the current decade. Although PSBP and PSBP2 present opportunities in FM areas such as building and maintenance work, projects are generally less costly and time-consuming than the work typically carried out under the BSF programme, meaning contracts have tended to be shorter and lower in value. Market performance has also been hampered by cuts in many education budgets.


However, the potential for further development of bundled FM services within the primary and secondary schools sector remains high, since single-service contracts are still commonplace. Furthermore, the current Government is expected to continue to encourage private sector


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involvement, together with greater co-operation across regions and local authorities.


In higher education, outsourcing has followed similar trends to those seen in primary and secondary schools and single-service contracts are most prevalent, although there is a higher proportion of bundled and TFM contracts within the student accommodation sector. The amount of privately-run student accommodation has grown strongly in most university towns and cities, with London and Sheffield two notable examples. Expenditure on outsourced services in general has increased in both the higher and further education sectors of late, but recently released figures indicate that the total property costs for the UK’s higher education estate have remained relatively static for the last three years, at around £2bn per annum. The largest areas of expenditure during 2015/2016 were repair and maintenance, energy costs, management costs, cleaning and security costs.


Building, maintenance and improvement has traditionally represented one of the largest areas of FM expense for public sector end users within the education industry, but its share has decreased amidst falling levels of expenditure. Although this trend has been apparent throughout the industry, it has been most acute in primary and secondary education.


For many in the higher education sector, the major challenge in future is likely to centre upon how to develop capital spending programmes to update facilities in the face of static or falling student numbers. It is possible that the coming years may witness a greater level of co-operation or collaboration between HEIs and private sector investors and/or operators. In 2018, the market for outsourced services in the education sector is forecast to increase of 2%, and by 2022, this figure is expected to reach £1.35bn, driven by the more integrated approach towards FM procurement many organisations in the education sector are likely to adopt over the coming years.


uThe information in this article is from the ‘Education Construction Market Report – UK 2017-2021 Analysis’ and the ‘Facilities Management Outsourcing – Health & Education Sector Report – UK 2018-2022’ reports, which are published by AMA Research. They can be ordered online at


www.amaresearch.co.uk BUILDING SERVICES & ENVIRONMENTAL ENGINEER APRIL 2018 25


uBuilding programmes in England’s educaon sector are being led by the Priority School Building Programme (PSBP), the first phase of which is currently under way and will help rebuild 260 schools.





Refurbishment


work is a strong sector for universies due to a backlog of repairs and upgrades to oen large and ageing estates and also due to the pressures on instuons to cut the operang cost of their buildings.





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