What's driving investment in healthcare today?
The UK Healthcare sector has faced many challenges following the decision to leave the EU, specifically, the recruitment and attraction of skilled labour from overseas. National Living Wage has also increased margin pressures for some corporates.
Despite these challenges, investment in the UK healthcare sector does not appear to have suffered, and in 2018 deal activity increased by 6% compared with the previous year. This trend is expected to continue throughout 2019 and beyond. Some of the key drivers behind this include:
An Aging Population
In 2017, the UK population was reported at 66 million, it is believed that this is set to grow to 73 million by 2041. As well as a rising population, we also have an aging one, with 18.2% over 65, this is projected to increase to 20.7% by 2027 . This combination has led to opportunities in areas including orthopaedics, ophthalmic, chronic disease management, mental health and preventative services like diagnostics.
A Pressurised NHS
We all know the NHS is under considerable pressure. Across the UK, hospitals cancelled 238,000 operations in 2017/18, this is equivalent to a cancellation every two minutes on average, with 304 being due to lack of beds and 151 due to staff unavailability . This pressure means more opportunities for outsourced providers including elective care services and discharge services.
Rising cost of healthcare
Changes in our lifestyle have resulted in increased levels of obesity, heart disease and stress, contributing to higher demand and costs of treatments. To help deal with this demand, investments in software and technology are being made, creating opportunities for technology solution providers.
Squeeze on skills and resource
The strain on the NHS means increasing demand for staff and specialist skills. This looks only set to increase as employers seek out the best skilled workers to keep up with growing demands.
Move towards digital innovation
Over the last 20 years, advances in medical technology has been the key influencer behind patent application to the European Patent Office with many companies developing new software that they believe can help reduce pressures on the sector.
Key technology developments include:
- Consumer devices – Patient empowerment is driving innovation, as health-related gadgets become increasingly popular. The medical wearables market has grown significantly with strong demand particularly from home healthcare.
- Big data – Working alongside AI (Artificial Intelligence) and machine learning, Big Data is used to analyse and identify patterns to help improve patient care.
- Regulation – As healthcare devices become more connected, greater consideration needs to be given to cyber security, and the risks associated with a breach to patient information. In Europe, new regulations for medical devices will replace all preceding directives and will be effective from 2020 and 2022.
With strong sector fundamentals, new business models and significant scope for consolidation, private equity and other financial investors can see the potential in healthcare and the exciting opportunities that can be created.
Key drivers for investment include:
- Scope to buy, build or consolidate in certain highly fragmented areas.
- Ever increasing demands on the sector will increase growth and profitability.
- With ever advancing technology comes exciting investment opportunities.
If you would like to know more about investment and deal activity in the healthcare sector, you can download our Mergers and Acquisitions Healthcare Snapshot below.