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If one word encapsulates the extraordinary last year, people; Who have lost their lives or loved ones. It is people who have fought the virus with 600 healthcare professionals in the UK losing their lives. It is people collaborating in adhering to previously unthinkable restrictions, and it is people who have discovered vaccines.

In this article, I want to begin and end on this note as we trace the way in which Covid-19 has impacted the UK Healthcare recruitment sector over the past year and look ahead as we enter 2021.

SCALE AND STRENGTH

It is important to remember how significant the healthcare sector is; The REC estimates that as of July 2020 some 550 agencies were members of its health and social care group and that this represented some 15.7% of its overall membership of 3,500. Looking only at the NHS, the majority of its 1.1million Full-Time Equivalent (FTE) staff work in hospitals and community settings.

In addition, according to figures from NHS Digital, there are some 55,000 FTE staff employed by independent healthcare providers, and even this may be an underestimate.

Furthermore, recent years have seen profound policy initiatives within the healthcare sector and NHS in particular. Given the envisioned transformation in the delivery models of care set out in the Five Year Forward View (2014) to the NHS Long Term Plan (2019) there is likely to be, in the words of former Health Secretary Rt Hon Stephen Dorrell, a “revolution” in the way the health service operates in the UK over the coming decade.

Political and Policy Preamble

It is important to realise that UK Healthcare recruiters have contended with profound policy changes affecting their market and business models in recent years.

Agency Rules
Perhaps the fundamental event has been the imposition (by what is now NHSI) of the “Agency Rules” from November 2015 to April 2016 limiting the rates agencies could charge and the overall NHS spend on agency staff.

The introduction of the Agency Rules was in response to an increased usage of Agency staff and the budgetary pressures facing the NHS.

Under “austerity”, the NHS saw spending growth of little over 1% a year in real terms over the period 2009/10 to 2017/18 compared to the average of 3.7% a year over its 70-year history.

NHS reliance on recruitment agencies for the supply of temporary agency staff had continued to rise from £3.18billion to £3.63billion per annum from 2014/15 to 2015/16 according to NHSI data.

This fell to £2.93billion in 2016/17 and then to £2.41billion in 2017/18 and has hovered at virtually that level in both subsequent years—a one-third reduction in the size of this market.

IR35
In 2017, legislation was introduced to change “IR35” in the public sector. This change meant the public sector end user had to assess whether or not a contractor was inside or outside IR35. According to some healthcare recruitment CEO’s, this was a chaotic time and compliant agencies suffered a loss of candidates.

MARKET FUNDAMENTALS

Despite these challenges, the sector remained an attractive one for investors given a number of fundamental trends:

Skills shortages
The Fourth Global Forum on Human Resources for Health met in Dublin in 2017 being convened under the auspices of the WHO. Its Dublin Declaration stated that, globally, 40 million additional healthcare workers would be needed by 2030 to meet projected demand; and added that on current projections there was a danger that there would be a shortfall of 18million.

Focusing only upon the UK healthcare market even before the commencement of the battle with Covid-19, there were significant shortages within the healthcare workforce. Several commentators referred to there being a “workforce crisis”.

For example, within the NHS, there were over 100,000 full-time equivalent vacancies with the shortage of nurses being highlighted in the Interim People Plan (June 2019) and identified as the most pressing issue facing the NHS. A National Audit Office Report in March 2020 highlighted 43,590 nursing vacancies reported by NHS Trusts in July-September 2019.

Turning to the adult social care market, it is instructive to note Skills for Care reported (September 2019) that 7.8% of roles in the sector were unfilled, equating to 122,000 FTE vacancies.

Increased Government Investment in the NHS
In the face of the record low funding increases referred to above, growing NHS Trust deficits and the consequent effect on performance, a new five-year funding settlement for the NHS was announced by Government in July 2018. This covered the period 2019/20 to 2023/4 and, under its provisions, the funding for the NHS was set to increase by 3.4% each year in real terms.

The current Government made significant Manifesto pledges regarding the NHS in the run-up to the December 2019 General Election, including increasing funding to add 40 new hospitals and dramatically increasing the number of nurses and GP’s.

In reaction to the Covid-19 crisis, further pledges of financial support have been made, including emergency funding and also the Government commitment to write off £13.4billion of NHS debt.

The desire for more Flexible Work
A Report from the National Institute of Economic and Social Research in February 2017 highlighted key factors driving healthcare professionals to choose temporary working. This included the preference for greater flexibility and dissatisfaction with the conditions of permanent employment in the NHS. It also added that the ability to earn more as a driver of this trend; unsurprising when RCN analysis of median earnings of NHS nurses has shown qualified nurses suffered real-time pay reductions of between 6.3% and 10.5% from 2011 to 2016.

Furthermore, the General Medical Council (September 2019) called on policymakers to value career breaks less than full time working and locum work for doctors.

The importance of offering flexible working is a fundamental feature of the NHS People Plan 2020/21 (July 2020), discussed below. It cited the finding that between 2011 and 2018, more than 56,000 people left NHS employment, citing work-life balance as the reason.

2020: An Epochal year

Despite these fundamentals, no one within the sector was prepared for the way Covid-19 would affect the market and the general economy.

The UK has seen almost 90,000 deaths and the virus has highlighted the inequalities in society and within the NHS in terms of the disproportionate effect of covid. The economy has shrunk by its largest margin for 300 years, and millions have been made unemployed.

More positively, there has been recognition of healthcare workers’ value, including those in adult social care and an acceleration of a shift toward more integrated services across the NHS and between the NHS and local government.

Recruitment Revenues
Within healthcare recruitment, given the de facto suspension of other services within hospitals, agencies have witnessed significant reductions in business volumes in broad terms. Anecdotal evidence from several CEO’s suggests falls of 20-25% in turnover. Many have reduced or furloughed staff.

More positively, healthcare recruiters have accelerated innovation in their business models, in order to drive efficiency and productivity, through more creative engagement with technology and growing use of outsourcing of core recruitment processes.

Despite the challenges, 2020 did witness a couple of major transactions (albeit early in the year) in the sector including the Twenty2020 investment in Cordant Group (which included Sugarman Medical: a month later (in April) Onex, the Canadian investment firm, acquired Independent Clinical Services (ICS).

Effect on healthcare budgets
The Autumn 2020 spending review revealed the scale of Government support that response to COVID-19 has required. It confirmed more than £50 billion was spent on health and care services in 2020/21 in direct response to Covid-19.

Further spending has been announced for 2021/22 and, according to the King’s Fund, once the additional costs of responding to Covid-19 are factored in, total Department of Health and Social Care spending (including both capital and resource spending) in 2020/21 rises to a colossal £201.7 billion.

If health spending had continued to increase at its long-run average 3.7 per cent level from 2019/20 onwards, we might have expected health spending to top £200 billion by 2030!

Healthcare Workforce Centre stage
The NHS long-term plan (2019) acknowledged the impact of workforce shortages and promised a national workforce strategy – an NHS People Plan. This was published in July 2020 (following an Interim People Plan in June 2019). Together, they highlighted urgent needs to tackle workforce shortages and create a more inclusive compassionate culture that honours the desire for flexibility and aims to root out inequalities.

THE YEAR AHEAD

We are now firmly in another (and perhaps the most serious) wave of the pandemic and healthcare recruiters that I have spoken with remain vigilant but positive about a bounce-back in demand post the successful rollout of the vaccine programme.

They point to the longer-term fundamentals making the sector attractive including projected additional healthcare staff needed (250,000 by 2030 in the NHS according to the Nuffield Trust and 650,000 by 2035 in adult social care according to Skills for Care).

It is also possible that even more Government investment in healthcare will occur. For example, on top £3billion set out in the Spending Review, the Government have confirmed there will be access to over £1billion of funding for social care. And recent Reports from select committees from Parliament have called for multi-billion increases in social care funding.

A number of key uncertainties, however, remain for the sector in the year ahead and beyond including:

  • Restoration of services: There remains significant uncertainty as to the potential for and timing of any full repair of all hospital services, including elective surgery. Although, it is clear these must be restored for overall population health and recruiters anticipate a spike in demand for their services when this eventually occurs.
  • Post-Brexit international recruitment: Some 13.1% of NHS staff have non-British nationality (5.6% from EEA countries) and the figure for adult social care is 16% (7% from EEA countries). The UK’s departure from the EU and its new points-based immigration system will likely have a significant effect on international recruitment, especially given no exceptions to this system are to be made for social care roles.
  • Workforce Wellness: In August 2020 the House of Commons Health and Social Care Select Committee announced that it would launch an inquiry into the level of burnout amongst staff and the healthcare system’s ability to manage staff stress amidst increased pressure brought about by the pandemic. This issue and the support healthcare workers will need is likely to be a long-term factor affecting the sector.

What is clear is that the quintessential human nature of recruitment will ensure that those agencies that are trusted by their candidates and clients and invest in continually improving their services to both are likely to prosper in a market whose fundamentals are so important for national flourishing.