Five key areas of opportunity for health businesses under a Labour government 

• With the General Election expected next year, Labour’s health team are moving to election footing and accelerating the development of their retail offer. While details in many areas are still to be developed, it is possible to identify Labour’s main areas of focus for health, where policy uncertainty remains, and where we are unlikely to see major change. 
  
• Shadow Health Secretary Wes Streeting has been clear that reform will have to do the heavy lifting on health service improvements. However, there are some key areas he has pointed to as a target for greater spending such as workforce and digital. Activities to improve productivity could also attract some investment, e.g. to improve theatre efficiency and flow through hospitals in the acute sector.
  
• Pivoting the NHS to focus on preventing ill health, not just treating it, has been a priority of successive governments – but so far none have delivered. Streeting is clear that this must be a core plank of his agenda – seeing it as the only plausible way of putting the NHS on sustainable financial footing given the ageing population. Businesses with products and services that support the delivery of this policy - e.g. AI, genomics and population health - are likely to benefit from this focus. 
  
• Labour will have a pragmatic approach to private sector involvement in health if it delivers lower waiting lists or transformation to support the push to out-of-hospital care. Reliance on private capacity (e.g. via outsourcing and insourcing) is likely to continue, albeit with more forensic scrutiny on value for money. 
  
• Labour has indicated it will review the Conservatives' New Hospital Programme. The nature of this could range from simply running an eye over it to something more radical around methods of construction and digital enablement.   

Sub-sector risks and opportunities for private providers and investors   

We outline the risks and opportunities for a series of sub-sectors where there are currently high levels of private provision or interest in potential expansion under a Labour government. 

1. Insourcing

The NHS has record waiting lists – a situation that is likely to be broadly unchanged by the time of the next election (and could get worse if strike action continues). Reducing waiting times will be a major priority for a Labour government and a key driver of insourcing demand. 

• The structural problems driving insourcing demand (historic backlogs, staffing shortages, limited utilisation of NHS facilities) are unlikely to significantly change. 
  
• Insourcing has low public and political visibility (and is generally poorly understood by MPs) so is less likely to attract political backlash than other areas of private provision (e.g. in recruitment or management/IT consulting). 
  
• However, a Labour government is likely to make greater efforts to ensure value for money through updating the existing guidance and clamping down on off-framework spending and conflicts of interest (e.g. NHS consultants establishing their own insourcing practices).

2. NHS Outsourcing (treatment and diagnostics) 

As with insourcing, the need to tackle waiting lists is likely to continue to drive NHS demand for outsourcing. But political attention on the service within the Labour Party injects risk of knee-jerk clampdowns in future. 

• Labour is far less comfortable with outsourced care than insourced as the former is better known and considered more politically toxic – to its base, the health community and unions (e.g. UNISON and the BMA are strongly opposed). 
  
• However, the size of the backlog in the short-term, and question marks over the NHS’s ability to expand its capacity to fully meet demand in the longer-term, mean outsourcing will continue to play an important role in the care mix.  
  
• In particular, there may be scope for outsourcing providers where they can introduce innovative outsourced services in the community (vs treatment in hospitals), in line with Labour’s focus on this priority. 
  
• Value for money and fair pricing of outsourcing services will be an area of heightened scrutiny. This is likely to continue the trend towards on-framework providers. 

3. Staffing agencies

Labour is likely to continue implementing the NHS Long Term Workforce Plan (and its ambition to reduce agency spend) but it will struggle to achieve the aims in full as underlying drivers of staffing shortfalls will persist. Demand for agency support is therefore likely to continue, but there will be an increasing need for suppliers to demonstrate value for money to be successful in winning contracts.  

• Staffing agencies can expect greater scrutiny under Labour – Wes Streeting wants a target to reduce off-agency spending and has suggested ‘agencies are making staff shortages worse’. 
  
• He has promised £1.1bn in extra funding for weekend and evening shift overtime, with the aim of reducing demand for staffing agencies. However, there are significant question marks over the extent to which the NHS will be able to attract overtime staff in sufficient numbers. Success would require NHS pay to be competitive with agency – which so far has broadly not been the case.  
  
• The practical realities of the mismatch between demand for care and supply of staff in the medium-to-longer term are likely to require continued agency use, despite Labour’s instinctive hesitations. Labour policy focus is instead likely to shift to reducing off-framework spend. 

4. Preventative services (including public health and diagnostics) 

Prevention is a core plank of Streeting’s overarching agenda – essentially because more sophisticated preventative care is seen as the only plausible route to putting the NHS on a sustainable financial footing. This is likely to result in new opportunities for sectors that can support, including population health, AI, genomics and diagnostics. 

• Streeting is clear that pivoting the NHS to a system that prevents ill health, rather than just treating it, will require a “10-year plan” and long-term reform. Fragments of what this will look like have, however, begun to form, providing an indication of opportunity areas for the private sector.  
  
• Primary care reform will play a central role. Streeting has been actively visiting areas of the country trialling models to provide more specialist and urgent care in the community. Providers that can support more sophisticated care delivery outside of hospital settings may benefit from this, e.g. remote monitoring technologies. Public health – identification of key priorities and then individual applications, e.g. on weight control, chronic diseases and exercise – could also be favoured. 
  
• Life sciences is another important area, with the Shadow Health team seeing breakthroughs in AI and genomics as critical levers for better prediction and prevention of illness. Population health technologies are another important instrument for delivering this at a macro level. Streeting has repeatedly spoken of his intention to streamline the process private providers face to sell proven, innovative technologies that can support better prevention. 

5. Digital transformation (IT solutions and consulting) 

Digital transformation has been viewed by successive governments as a critical means to boosting NHS productivity – but has suffered salami-sliced budgets as other health crises have risen to the fore. If capital spending budget is forthcoming, Wes Streeting is likely to prioritise investment in technology.  

• Streeting believes the health system is significantly behind other sectors and the general public on data and technology use. He sees great potential for efficiency gains and improved patient service by delivering improvements to basic IT infrastructure (e.g., good wifi, computers in GPs) – while new technologies like AI can help to redesign how health is delivered. 
  
• Labour has pledged capital investment in modernising medical equipment and technology (such as AI-enabled diagnostics) and an extra £171m per year through a ‘Fit for the Future Fund’ to double the number of scanners.  
  
• Labour recognises private sector expertise will be critical to delivering wider digital transformation – something which influential Labour-affiliated think tanks like the Tony Blair Institute support. Notably, at a conference fringe event, Streeting said that at the start of this year he had spoken more to tech companies than frontlines services, as he felt this was the future.

This blog was written by directors Verity Ryan, Jodie Gallagher and Martin Summers. Verity advises investors on health policy, political and regulatory issues. Jodie is a health specialist at Flint, joining from NHS England. Martin works with private equity and their portfolio companies and has worked on over 60 transactions, including many in the health & care sector.