New equity offers some optimism in UK market amidst growing dentist workforce concerns and economic uncertainty
LaingBuisson has published the fifth edition of its Dentistry UK market report revealing a steady ‘High Street’ dentistry market, valued by LaingBuisson at £7.1 billion in 2017/18, which grew 0.2% in real terms (after taking account of CPI). Of this, private sector dentistry accounted for £3.6 billion, while NHS spend amounted to £3.5 billion.
Private dentistry has been a good driver of growth for a number of years, underpinned by the popularity of hygiene services, cosmetic dentistry and facial aesthetics, and specialist treatments. There is also an increased number of NHS patients paying for private treatment options within their dentistry care plan. Conversely, in 2017/18 there was a real decline of 1.2% in spending on NHS dentistry.
It comes at a time when the number of adults seen for NHS dentistry services declined for the first time in recent years, with a significant fall in NHS (UDA) activity, as total UDAs (Units of Dental Activity) completed in England undershot contracted activity because of labour shortages in some areas. Significantly, there has been a reduction in the number of NHS exempt patients following a shift in welfare benefits and also a tighter monitoring of exemptions. In addition, fewer higher value treatments are carried out through the NHS.
LaingBuisson predicts that the market will continue to grow by an average of 2-2.5% in nominal terms in the next three years. This will mainly come from more spending on private dentistry, though much depends on the strength of the UK economy, and spending on NHS dentistry is expected to fall in real terms. Modest economic growth is currently forecast, which may hold back stronger consumer spending, and the impact of Brexit is uncertain and carries an economic and supply-side risk.
Challenges for the dentistry market are currently focused around recruitment and retention. Serious recruitment difficulties have been seen in some areas of the country, where NHS demand is high, and insufficient dentist hours have led to shortfalls in contracted NHS work and patients seen. This comes at a time when a new NHS dentistry contract model, which aims to improve prevention and focus on patient outcomes, continues to be tested after many years of planning.
Optimism for the market is reflected in the number of new equity investments, and regular transactions, that have been made in the past year. These include Jacobs Holding investing in Colosseum Dental, August Equity in Dental Partners and individual investors putting money into Gensmile. Other new investors include Apposite Capital, Dentex and SimplyHealth Professionals, and further investments are expected in the coming years.
Report author, Philip Blackburn, said:
“UK dentistry has long-term drivers of demand: regular hygiene for prevention; desire for cosmetic dentistry and facial aesthetics to improve appearance; and progressive specialist treatment services which can offer a wide range of advanced dental procedures. Private dentistry has grown well enough in recent times under a stable economic environment, and many dental providers seek opportunities for continued growth. However, future economic wellbeing, a key driver for the private market, is currently vulnerable. Modest UK growth is projected for several year, though Brexit holds a wild card on the economy and EU labour supply. Also difficulties in the recruitment and retention of dentists and other dental professionals poses a risk for dentistry market growth in general.
“Investment interest in UK dentistry has been healthy and continues to be, as investors are optimistic about underlying demand conditions and scope for market growth in the long-term. This has been highlighted by continued growth in corporate dentistry, which now accounts for over a quarter of UK dentistry market value.
“At the same time, NHS dentistry is falling behind, and policymakers face a clear challenge to ensure demand for NHS dentistry services is being met across the UK. Contract volume shortfalls in England continue to keep a lid on higher activity, and many dental employers face significant recruitment and retention challenges for NHS work in certain areas, which are compounded by Brexit concerns. A new NHS dentist contract which aims to improve prevention and patient outcomes, is still some distance away, with its industry-wide impact not yet known, and the new NHS Long Term Plan from the Conservative government did not mention additional financial support for NHS dentistry.”
Find out more about the report here
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