Government cuts to funding have slowed down the market for pharmacy premises by almost a quarter in just a year, a national accountancy firm has said.
According to UHY Hacker Young, UK 760 pharmacies changed hands in 2018, down from 990 in 2017.
The 24% drop in sales can likely be attributed to the Government’s cuts to English community pharmacy funding, the accountancy firm said today (3 June).
Although pharmacies are seen as a ‘relatively safe’ investment due to stable income from prescription sales, UHY Hacker Young said, this was undermined in 2015 when NHS prescription funding was cut by 6%, with a further 12% cut in 2016.
Pharmacy partner at UHY Hacker Young John Ierston said: ‘Restricted Government funding has led to lower gross margins and to some cooling off in mergers and acquisition activity.
‘However, pharmacies are generally such stable investments that we expect deal making to continue, particularly when borrowing costs remains cheap. We ourselves have been advising on and supporting increasing numbers of pharmacy transactions in recent months.
‘The additional cost savings that consolidation can deliver make these deals very attractive.’
Change in the air
However, the accountancy firm predicts that the year ahead could see an upturn in sales due to the Pharmaceutical Services Negotiating Committee (PSNC) securing funding to remain at current levels for 2018/19, thereby halting concerns about prescription sales declining further.
PSNC is currently in negotiations with the Government on the 2019/20 contract and has previously highlighted ambitions to secure a multi-year funding deal. This would ‘confirm funding to the sector for several years, giving pharmacies greater predictability of earnings’, UHC Hacker Young said.