Is Modular Construction the answer to NHS Financial Pressures?

April 11, 2024

Ongoing NHS budget constraints and capital pressures creates a challenging environment for investment in new infrastructure whilst maintaining high-quality patient care.

Traditional construction methods often come with expensive price tags, extended project timelines, and unforeseen expenses, thereby increasing the financial strain. This, combined with NHS funding facing the biggest “real-terms cuts since the 1970’s” according to the Institute of Fiscal Studies means the NHS should look to seek viable alternatives to traditional construction, with modular construction providing an effective and viable solution, offering a more streamlined and cost-effective approach.

This blog will explore the benefits of modular construction and how SAF Solutions can play a pivotal role in overcoming budgetary constraints.

What is Modular Construction and How Does it Work?

Modular construction is a form of Modern Methods of Construction (MMC) which involves the process of manufacturing facilities off-site, under controlled factory conditions, using the same materials and designing to the same standards as conventionally built facilities.

Modules are then transported from the factory and assembled on-site to create the final structure, with the on-site assembly process being significantly quicker and more efficient when compared to traditional construction.

Benefits of Modular Construction for NHS Trusts

Some of the key benefits of utilising modular construction methods within the NHS include:

  • Speed of Construction: Modular construction allows for faster building timelines compared to traditional construction methods. This speed is crucial for healthcare facilities, especially where there is a need to quickly expand capacity to combat the backlog in patient waiting lists or rising patient demand for services.
  • Cost Efficiency: Modular construction can be more cost-effective due to reduced construction time, reduced material waste, and the ability to leverage economies of scale in manufacturing modules. This is particularly important for the NHS, with the increased prevalence of stringent budget constraints.
  • Minimal Disruption: Construction of modular facilities can be significantly less disruptive to existing healthcare operations. The majority of the construction work occurs off-site in the factory, minimising disruptions and personnel on-site that could impact patient care or hospital operations.
  • Temporary or Permanent Solutions: Modular construction can be used for both temporary and permanent healthcare facilities. This flexibility is beneficial for accommodating fluctuating patient demand or responding to healthcare crises.

How modular facilities procured via a lease agreement could help 

Whilst the benefits of modular construction are clear, the financial aspect remains a critical consideration for both NHS Trusts and modular construction providers. The partnership between efficiency, adaptability, and flexible finance solutions holds the key to building a resilient healthcare system that thrives amidst financial challenges, which is where bespoke finance solutions can play a pivotal role in overcoming budgetary hurdles.

SAF works with a number of the UK’s largest Modular Building providers including ModuleCo Healthcare, Premier Modular, McAvoy Group, and MTX Contracts, funding more than £750m worth of modular construction projects, creating solutions that allow for the use of different accounting treatments and financial drivers.

We work in close collaboration with our trusted modular supplier partners and NHS Trusts to gather an understanding of requirements that enable us to create bespoke finance solutions that structure repayment profiles to align with the Trust’s complex approval limits and capital restraints.

We continue to see huge increases in demand for modular facilities from NHS Trusts across the UK, with SAF creating the tailored finance solution for the procurement of numerous modular facilities.

Our most recent modular project came in the form of a £23m Surgical Ophthalmology and Outpatients’ Facility at University Hospitals Plymouth NHS Trust. Through our strong working partnership over the years, SAF worked alongside MTX to develop a funding solution for a new Ophthalmic facility as part of Plymouth NHS Trust’s new Royal Eye Infirmary. This project is a fantastic example of how modular construction integrated with bespoke finance solutions can help NHS Trusts combat financial pressures.

Modular Construction via flexible finance agreements for NHS Trusts

The SAF team can support NHS Trusts procure state-of-the-art modular facilities via two funding structures:

  • Bespoke Finance Agreements: Modular construction projects can be made possible via a bespoke finance agreement, removing the need for upfront capital investment, and allowing NHS Trusts to benefit from upgraded facilities, without the need to secure outright funding. Structuring payments allows Trusts to spread costs over an extended period, freeing up capital budgets to be used on more immediate procurement projects.
  • Managed Service Agreements: A solution that allows for a Trust to incorporate both hard and soft facilities management including building maintenance, cleaning, security, pest control and other general facilities management into the repayment structure, allowing for VAT to be fully recoverable on repayments.
  • Pay Per Use: This solution allows for revenue budget utilisation to be achieved by NHS Trusts. With capital budgets coming under increased pressure, a solution that allows for revenue budgets to be used is a great way for Trusts to access new facilities without the use of capital budgets. A pay-per-use structure allows an NHS Trust access to additional clinical capacity whilst paying as and when the facility is utilised.

How SAF can help

In the journey to alleviate NHS financial pressures, modular construction stands as a transformative force. By embracing the benefits of modular construction and collaborating on innovative finance solutions, NHS Trusts and modular construction providers can co-create a sustainable future for healthcare infrastructure.

Our team is experienced in the complexities that come with public sector funding challenges and budget constraints.

To find out more about how we could support you, take a look at our range of case studies within modular construction or get in touch with our team today.

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