Why investors should pay close attention to the UK’s health tech sector in 2023

The UK is emerging as a promising hub for potential investment in the healthcare industry. Opposing the challenging economic forecasts surrounding inflation and future scenarios, interest in the global healthtech market is accelerating. Healthtech investments in the US, the EU and the UK reached a record $23 billion in the first three quarters of 2022 despite global disruptions. The UK has led this investment surge, with healthtech investments increasing from £345 million in 2016 to over £2.9 billion in 2021. Rivalling China’s market, the UK is on a path to becoming a considerable healthtech hub in Europe. A critical part of growth is due to the digital health industry, which secured a little over £22 billion in investment last year.

With startups capable of delivering some of the region’s most progressive solutions to the challenges facing modern healthcare, there is an opportunity for investors to capitalise on this growth and assist healthcare systems as they transform the ways they work with patients. 

Recognising investment opportunities in the health tech sector requires understanding the demands that drive growth. The pandemic has shown patients across the UK the benefits of a more innovative digitalised healthcare system. Since the pandemic, digital healthcare solutions have focused on improving access to primary care and providing patients with informative details and studies suggesting only 10% of patient care requests indicate a preference for face-to-face GP consultation in 2022.

The SME market tends to dominate this industry and has been fuelling further growth. The area between London, Oxford and Cambridge contains over 500 health tech startups, securing support from VC investors within the last five years. Furthermore, seven of the UK’s 47 unicorn businesses i.e. private companies valued over $1 billion, operate in the healthtech industry. This figure signifies a considerable opportunity for investors worldwide looking to capitalise on the significant growth of healthtech in this area.

Challenges driving innovation

In the UK, the combination of workforce challenges, ongoing implications of the pandemic and rising costs within healthcare is putting considerable pressure on public and private healthcare providers. These pressures have had a significant impact on the industry. For example, over 600 community pharmacies have closed their doors since 2016, with about 30% of these closures happening in deprived regions of the UK. With additional pressure comes innovation, and health tech startups are well-placed to play a vital role in delivering innovation and change. For example, AI and computer learning systems can capture fast and reliable remote diagnostics, even in remote areas of the UK.

With the UK Health Secretary driving toward a ‘pharmacy first’ policy to alleviate pressure on healthcare, there is an opportunity for healthtech businesses and investors to capture a leading role in the transformation of UK healthcare, with pharmacies leading the revolution.

Digital pharmacy technology is appearing with new and innovative solutions to eliminate the decline of community pharmacies in the UK. Digital platforms are appearing nationwide to save time and deliver a digital connection between patients and local pharmacies. These technologies provide an efficient way for patients to manage healthcare, but they also enable pharmacists to focus more time on revenue generation to allow continued frontline care for communities. 

While investment in AI and other technologies is essential, delivering an effective healthcare system requires implementing the early stages. Dissimilar to other parts of the UK healthcare system, the pharmacy industry is falling behind with progress in digitialisation. Many customers need continuous prescriptions or regular checkups at their pharmacies and depend on pharmacies to maintain in-house records. However, many pharmacists use old computer systems and paper records. Introducing a basic patient system is critical to delivering the foundations for integrating more advanced technologies at a later date. Healthtech startups offer investors an opportunity to utilise early-stage innovation and contribute to the shift to a tech-focused healthcare system.

Investment in digitalisation of patient management in the public and private industries continues to grow, with spending on cloud digital and cyber tech within the NHS increasing 50% year on year and making up over a third of the UK’s healthtech market. The ongoing demand from customers and the government for technological progression of the UK healthcare system acts as a driving force for more innovation and development within the UK healthcare industry. This demand will strengthen and enhance its reputation as a valuable area for investment and innovation.

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