Oct 29 2018
The government’s autumn statement is set to offer more detail on the £20.5 billion five-year funding increase to the NHS that was announced in June. The money should inject some much-needed investment into the service, which has languished over a decade of budgetary austerity. The financial boost should allow the NHS to fund essential improvements to flagging services and build on long-term aims. In this sector snapshot, IBISWorld has identified what it thinks are some central themes affecting the healthcare sector in this quarter.
According to figures from NHS Digital, the number of unfilled posts across the NHS in England for doctors, nurses, midwives and therapists is running at the highest level since records began in 2015-16. In the six months to March 2018, the NHS advertised nearly 70,000 vacant nurse and midwife positions, an increase of 8.2% on the same six-month period in 2016-17. Overall, the vacancy rate for nursing staff in the NHS exceeded 10% during 2017-18, meaning that one in 10 of all nursing posts were unfilled during that period.
Perhaps a key reason for this labour shortfall has been the cap on public-sector pay, which has prevented average wages from rising more than 1% a year, a lower rate than inflation. Since the implementation of the pay cap back in 2013, real wages for NHS workers have declined as increases in the cost of living have outstripped pay-rise constraints. This has deterred many qualified medical staff from pursuing a career with the NHS. Many workers instead choose employment with temporary employment agencies (see IBISWorld report N78.200), where workers can expect almost double the hourly pay of public-sector employees. IBISWorld estimates expenditure on agency staff to amount to 3.2% of total revenue across the Hospitals industry (IBISWorld report Q86.101).
In April 2018, the government agreed to lift the pay cap for NHS workers in England, allowing for an average 6.5% pay rise over three years for one million NHS workers, though doctors, dentists and senior leaders are excluded. All but the most highly paid staff will get a rise of at least 3% by the end of 2018-19. Wages are estimated to account for just over one-third of revenue in the Hospitals industry in the current year and are likely to rise further as pay rises are implemented. It is clearly hoped that in the long run, a more generous remuneration for NHS workers should help fill vacant posts and cause staff turnover rates to decline.
However, planned restrictions to freedom of movement between the European Union and Britain after Brexit have the potential to erase staffing gains. NHS employment figures show the percentage of EU nationals joining the NHS in nursing positions fell from 19% in 2015-16 to 12.4% in 2016-17, then further to 7.9% in 2017-18. This number is likely to fall further if restrictive legislation is put into action.
The level of private-sector involvement in the healthcare sector has increased in prominence in recent years, as the NHS has struggled to meet rising demand. Since April 2013, private providers have been able to bid for NHS contracts. Analysis of the Department of Health’s published accounts shows that the share of spending by NHS commissioners on the private sector was 7.3% of the revenue budget in 2017-18, with nearly 70% of contracts going to for-profit companies
The initial reasoning for opening up the market to private providers was the hope that this would encourage competition and drive efficiency. However, the move has also sparked concern over the motives of profit-driven companies delivering NHS contracts. Virgin Care, one of the NHS's largest subcontractors, sued the NHS in November 2017 after missing out on a private NHS contract to provide children's medical care in Surrey worth an estimated £82 million. The NHS and Surrey County Council subsequently paid Virgin Care £2 million of public money. More recently, Healthcare Environmental Services, a firm contracted with the disposal of medical waste for the NHS, was stripped of 15 contracts with English Primary Care Trusts after it emerged that waste was piled up and stored inappropriately at disposal sites. The dramatic failure of Carillion, the private company that managed a number of public-sector contracts, in 2018 also highlighted the potential risks of entrusting essential services to private contractors.
Earlier this month the NHS passed the 1 October deadline for the roll-out of extended opening hours at GP clinics in England. The scheme promises to ensure that patients are able to see a GP from 8am to 8pm every day of the week as the core element of its push to create a ‘truly seven-day NHS’ by the end of the current parliament. While early reports suggest that the target has been broadly met, despite a low initial uptake, the move has been condemned by some GP-led organisations as squeezing out traditional providers in favour of private companies. Clinical Commissioning Groups are required under the 2012 Health and Social Care Act to put out all contracts to a competitive tender process, meaning local GP services have had to bid to run services against commercial interests. Many in the General Medical Practices industry (IBISWorld report Q86.210) see the move as encouraging unnecessary privatisation in the NHS. Given the high-profile outcome of failures by private contractors in recent memory, the healthcare sector is understandably wary of inefficiencies in profit-seeking companies.
IBISWorld industry reports used in this spotlight report:
Q - Human Health & Social Work Activities in the UK
Q86.101 - Hospitals in the UK
Q86.210 - General Medical Practices in the UK
Q86.220 - Specialist Medical Practices in the UK
Q86.900 - Diagnostic & Ambulance Services in the UK
Q86.901 - Allied Healthcare Services in the UK
Q87.100 - Residential Nursing Care in the UK