Profit gap increases between NHS and private practices

Statistics reveal the profit gap has widened between NHS and private practicesThe average private practice’s profit is more than £16,000 greater than that of its NHS counterpart.

This is according to the latest figures from NASDAL (National Association of Specialist Dental Accountants and Lawyers).

The statistics show that the average net profit for an NHS principal is £124,475. This compares to £140,951 per private principal, revealing a £16,000 difference.

Overall, the industry market has seen a modest hike of in fee income (+3.5%) as well as an increase in profit (+2%) in both private and mixed practices.

On the other hand, staff costs have seen an increase. Practices overheads also swelled more than the NHS contract uplift.

Additionally, the data reveals a fall in profit of 1.4% for NHS practices when compared to the figures of 2017-18

The amounts to a reduction in the average net profit per principal, down from £126,269 to £124,475.

Ian Simpson, chartered accountant and a partner in Humphrey and Co, said: ‘Private practices are continuing to do well and a profitability gap is widening between private and NHS practices.

‘NHS practices have seen an increase in costs, most notably in staff and general administration.

‘As one might expect, mixed practices seem to be sitting somewhat in the middle.

‘They have the highest cost ratios and typical mixed practice profit is nearly £8,000 less than a typical private practice profit, and £8,000 more than an NHS practice.’

Effective businesses

On top of this, the statistics also unveil a hike in associate profitability of more than £1,000.

It stood at £68,155 in 2017-18 – but increased to £69,324 in 2018-19.

This is despite a fall in average income, from £86,310 in 2017-18 to £85,524 in 2018-19.

Nick Ledingham, of Morris & Co, specialist dental accountants and chairman of NASDAL, said: ‘The benchmarking report continues to deliver useful information and tools to help dentists run more effective businesses.

‘However, it would be remiss of us not to mention the elephant currently in the room – COVID-19.

‘We know this will have a life changing impact on dentists and dental practices across the country – we wish everyone well and will of course share useful information as and when we have it.’

NHS Practices

  • Small increase in fee income (+2%)
  • Increase in expenses, more specifically wages and general administration costs
  • Net profit down by 1.4% from last year

Mixed Practices

  • Typically have the highest level of fee income
  • Typically have the highest cost ratios
  • Typical mixed practice profit is nearly £8,000 less than a typical private practice profit
  • Additionally, it is £8,000 higher than NHS practice (NHS £124,475, mixed £132,940, private £140,951)

Private Practices

  • Continued recovery in fee income (+5.5%)
  • General increase in associate costs and wages
  • Moderate increase in profit (+1.5%), with a £140,951 average net profit per principal in 2019 in comparison to £138,806 in 2018
  • Typical private practice profit more than £16,000 greater than a typical NHS practice

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