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Challenge & opportunity – investor and business outlook for the UK health and care sector  

Key points

  • The key challenge for health and care will be to deliver more with less, as spending and inflationary pressures grip. Managing the backlog is a priority. Long-term reform will continue but at a slower pace.  
  • Battles lie ahead over how the government’s additional funding settlement will be spent. Projects with a wide ecosystem of supporters have the best chance of surviving aggressive prioritisation and cuts.  
  • Private provision will be essential in easing acute pressure across health and care services. More important than ever, health businesses and investors must demonstrate efficiency to secure contracts.  
  • Services that can help move care out of hospitals, and deliver more sophisticated preventative and rehabilitative health care, plus tech and R&D innovations that can drive operational efficiencies are key potential areas of opportunity for business.  

What challenges are facing health and care?  

The challenges facing the new Health Secretary heading into winter are not new: the Covid backlog; strain on emergency, primary and social care; and workforce pressures. However, the wider backdrop has worsened, with strike action by nurses and paramedics planned, and inflationary pressures squeezing existing spending settlements.  

Alongside this, the link between the health service and the UK’s economic performance is increasingly under scrutiny. 20% of the working-age population is now inactive, an increase driven in part by long-term sickness. Tackling health challenges is increasingly seen as a lever for economic productivity by the centre of government. 

What is government’s approach?  

While an extra £8bn in funding was allocated to health and care in the Autumn Budget, difficult decisions on spending priorities are unavoidable. Both Rishi Sunak and Steve Barclay have deep-held scepticism about the efficiency of NHS spending and have had strained relations with NHS leadership. In contrast (and unusually for a Chancellor), Jeremy Hunt has more sympathy for the NHS leadership’s arguments following his six-year stint as Health Secretary.   

The government’s immediate priority is getting a grip on the Covid backlog. ‘Winter crises’ are not unusual in health, but there is a fear that visible signs of stress on the system could be much worse than usual this year, and offer an electoral gift to the Labour Party.   

Reform, for now, is taking a back seat – but it is still seen as essential for the long-term sustainability of services, with a workforce plan covering NHS recruitment, retention, and productivity promised for next year. The sector is also being targeted for economic growth, with life sciences singled out in the Autumn Statement, and Chief Scientific Adviser Patrick Vallance looking at opportunities for regulatory reform to boost the UK sector.  

Opportunities for business and investors 

Five core areas of opportunity for health businesses and investors include: 

  1. New channels for care  
  • Government is keen to direct patients away from hospital and GP settings where possible to reduce service bottlenecks. Key to this will be expanding remote monitoring services as well as delivery of more home testing, new surgical hubs and community diagnostic centres. The Health Secretary has also indicated an interest in expanding the role of pharmacies to reduce the strain on GPs.  
  • Barclay sees a strong role for private provision in facilitating this, including through provision of new technologies, domiciliary care capacity, and physiotherapists or occupational therapy services. 
  1. Life sciences  
  • The government has protected research and development (R&D) spending, which will increase to £20bn a year by 2024-25. This represents a significant funding opportunity for businesses in the sector.  
  • The Health Secretary is keen to recalibrate the health service’s risk appetite for innovations from R&D and see faster adoption of new medicines and technology. Procurement is one area he may revisit to support this. He is also seeking to leverage the success of the Covid Vaccine Taskforce and is applying the same model to cancer, mental health, obesity and addiction challenges. These programmes provide significant opportunities for the private sector to partner with government. 
  • Increases in the rate of Research and Development Expenditure Credit (RDEC) from 13% to 20%, announced in the Autumn Statement, will support large investors. However, reductions in the SME RDEC rate and credit rate may affect smaller portfolio companies. A consultation on the design of a single RDEC scheme will aim to promote R&D-intensive SMEs.  
  1. Digital and technology  
  • The Health Secretary sees huge opportunity in the use and application of Big Data and associated technologies in the NHS. He is keen for patients to be able to “lean in” to sharing data in order to access early treatments. As with his predecessors, improving tech infrastructure remains a priority – and key source of future efficiencies. Private providers are seen as a key partner to government in this, including rolling out electronic patient records.  
  • The Chancellor recently set out his ambition to turn Britain into “the world’s next Silicon Valley”. Opportunities for regulatory reform extend to health digital and tech – business and investors should highlight the growth potential of new technologies within their portfolio.  
  1. Preventative care 
  • Broad political consensus has built around better preventive health as the route to a more sustainable NHS. Safeguarding budgets from cuts will, however, require vigilance in the current climate.   
  • Application of innovative new technologies to deliver more sophisticated preventative health (e.g. chips in urinals to diagnose diseases before a person is aware) is a particular interest to the Health Secretary. Population health tech also remains an area attracting investment, with several pilots of system around the UK. The Health Secretary sees huge opportunity in leveraging patient data – utilising cloud, AI and IoT to inform improved patient outcomes.  
  1. Social care 
  • NHS performance is closely tied to that of adult social care. Private provision will continue to play an important and growing role in social care delivery in the short term, particularly as government aims to deliver 200,000 more care packages by 2025.   
  • The decision to scrap the Health and Social Care Levy will exacerbate funding challenges within the sector. As a result, debate on adult social care is likely to feature heavily at the next election – Labour and the Conservatives will have to set out a vision for the future of the sector including the role of private providers.   

This blog was written by James Hedgeland, Director and Verity Ryan, Director who co-leads Flint's work advising businesses and investors on health policy; and Anna Trevers a manager at Flint who advises corporate and investor clients in health and life sciences.

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