RSM UK’s head of healthcare Suneel Gupta and head of NHS Clive Makombera, highlight the key themes dominating the healthcare sector in 2025:
Funding and investment – The average deal value of private equity buyouts in the healthcare industry was £68m in 2024, over double the average of £32m in 2023, according to Pitchbook. That said, while deal values jumped from £3.5bn in 2023 to £6.8bn in 2024, the number of deals fell from 110 to 99 in the same period.
Suneel Gupta: “The healthcare industry has long been viewed as a robust option for investors, but it hasn’t been sheltered from the impact of high interest rates, rising cost of debt, and uncertainty, which have hindered investment opportunities. Investors have been more risk adverse and favoured larger established businesses with a proven track record. With immense pressure on the NHS and growing waiting lists, it is clear support from the private sector is needed to ease the burden. As interest rates slowly come down, there’s a renewed optimism that we will see an increase in investment activity in 2025 and beyond. There will however be a greater focus on more robust due diligence, with high quality data being increasingly important during the deal process to drive value and build investor confidence. As a result, deals may also take longer to complete.”
Tighter margins and workforce pressures
Suneel Gupta: “A significant headwind for the healthcare sector is the increase in employers’ National Insurance contributions (NIC) from April 2025, along with a 6.7% rise in National Living Wage (NLW). Whilst welcome news for workers in the industry, many of whom are under immense pressure and facing burn out, margins will be significantly hit. Businesses across the health and care sector are often heavily dependent on staff that are paid the NLW, so the impact will be severe, and in some cases devastating, and it places further strain on squeezed margins. Businesses will need to think of creative ways to mitigate these costs, for example, the adoption of technology to create efficiencies will be a gamechanger. Healthcare leaders will also need to consider transforming their care models and redesigning jobs in order to address the skills shortage in the sector.”
Increased collaboration
Suneel Gupta: “Private hospital admissions reached 232,000 in Q2 2024, the second highest total on record*. The NHS is already collaborating with the independent sector to support with increased patient demands, which will only increase further as part of the government’s efforts to reduce waiting lists. The private sector plays a huge role in supporting the NHS, delivering care and investing in new products and technologies. Plus, with resources in the NHS significantly constrained, harnessing the skills, innovation and capacity of the private sector will be key in easing this pressure. But investment and collaboration within the sector must be done carefully, so patient outcomes are not compromised at any stage.”
Data and AI
Clive Makombera: “Advanced data sharing and increased digital maturity is a crucial strand in making the NHS fit for purpose. In addition, AI has the potential to transform healthcare by optimising both administrative functions and care delivery with improved care quality, enhanced patient experience, and greater clinician satisfaction. There needs to be a shift from a reactive culture to being more proactive, and investment in technology is needed to make this happen. Tech can be hugely powerful in driving down costs while improving productivity, and diagnostic capability and quality. An example is investing in diagnostic imaging equipment to help with the early detection of illnesses which would massively reduce the pressure on the NHS, or using AI to efficiently analyse and process vast amounts of data. However, as more collaboration and data sharing takes place between the NHS and private sector, this will also mean an increase in cyber threat. It is therefore more important than ever that organisations adopt cyber security foundations early on to avoid falling victim to an attack.”
*PHIN private market update: December 2024, United Kingdom
