UK dental market: A year in review

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The dental sector emerges resilient and ready for transformation following a challenging year for dentistry, which included economic shifts and workforce challenges. This year is set to be a time of balanced growth and stability, with an air of optimism that permeates the sector.  

In our latest Business Outlook report, we review the marketplace in 2023 and look ahead at what we can expect in 2024, here are some of the key takeaways.  

OVERVIEW OF THE 2023 MARKET 

The dental industry, like many sectors, has faced its share of challenges due to cost inflation and rising interest rates. Before the mini-budget announcement in September 2022, the industry was already adapting to less predictable market conditions. Despite these hurdles, including ongoing workforce issues particularly within NHS dentistry, we maintain a positive long-term outlook for the dental market. 

In 2022, the dental sector experienced robust transaction activity, largely fuelled by corporate buyers committed to acquisitions. However, the swift escalation in interest rates, soaring operational costs, and staffing difficulties led many corporate entities to halt their acquisition strategies in early 2023. This resulted in a notable decrease in transaction volumes as companies shifted their focus towards organic growth over acquisitions. During this period of change, we saw a 9.8% decrease in transaction completions. 

In contrast, the independent dental market saw a resurgence in the latter half of 2023. With reduced competition from corporate buyers, there was a significant uptick in transactions involving first-time buyers, current owners, or smaller independent groups, accounting for 69% of deals. This revival was partly driven by our specialist dental team introducing 45 practices to the market on behalf of BUPA earlier in the year, leading to a 150% increase in agreed transactions in the second half of the year. This surge in the independent sector also led to practices achieving, on average, 113% of their asking price in 2023. Furthermore, the number of offers received increased on the prior year by over 80%, with an average of 4.4 offers per sale, nearly double that of 2022. The latter half of 2023 also saw an improved influx of new practices entering the market. Looking forward, we are optimistic about a return to more stable trading conditions in 2024 as this trend continues.  

As part of our annual sentiment survey, we surveyed dental professionals across the country to gather their views on the year ahead. Encouragingly, 68% of people said that they are positive about the year ahead – a 20% rise from survey figures reported in the previous year. When asked about their sale and acquisition plans in 2024, 64% said they are planning to either buy or sell this year.  

ECONOMIC PRESSURES 

Recruiting and retaining skilled dental professionals is a growing concern in UK dentistry. The combination of an ageing workforce, fewer new entrants into the profession, and the impact of Brexit on international recruitment adds to the strain. In the UK, businesses are grappling with the challenge of rising wage costs. This trend, driven by a competitive labour market and increasing living costs, has pressured operators across the sector to offer higher salaries to attract and retain talent. Additionally, the Government's increases in the National Living Wage and National Minimum Wage have contributed to the upward pressure on payroll expenses. This not only impacts the bottom line of businesses but also influences their strategic decisions regarding staffing, investment in automation, and overall operational efficiency. 

NHS dental services often face funding constraints which affect the profitability and sustainability of practices relying on NHS contracts. Private dentistry, while less affected by funding issues, must navigate the balance between competitive pricing and covering higher operational costs. Practices also continue to face increased costs in supplies, utilities, and equipment maintenance. The inflationary pressures and supply chain disruptions are significantly impacting the bottom line. 

CONSUMER TRENDS 

Consumer trends in UK dentistry reflect changing attitudes and behaviours towards oral health and dental care, with significant implications for dental practices and the industry as a whole. 

Since September 2020, the UK has witnessed a significant surge in private dentistry which can be partly attributed to the critical challenges faced by the NHS during this period which led many patients to transition to private dental services — a shift that might become a lasting trend. Although there are indications that the demand for premium-priced treatments is beginning to stabilise, the interest in essential and preventive general dental care remains robust. This ongoing strength in demand underscores the growing importance and preference for private dental services in the UK. 

The use of digital technologies in dental care - such as digital scanning, 3D printing, and teledentistry - is also on the rise. These technologies offer convenience, precision, and personalised care - aspects highly valued by consumers. While these advancements can improve efficiency and patient outcomes, the cost of adopting new technologies can be prohibitive for some practices. 

SUSTAINABILITY 

 The dental industry generates a significant amount of waste, including plastics, packaging, and hazardous materials. To address this, many practices implement robust waste management and recycling systems, segregating different types of waste, recycling materials wherever possible, and disposing of hazardous waste responsibly. An increasing number of practices are adopting initiatives such as reducing water and energy consumption, implementing digital record-keeping systems, and adopting green building practices. In addition, sustainable procurement practices ensure the use of eco-friendly dental materials and supplies, such as recyclable or compostable packaging and low-waste disposables. Advancements in dental technology can also play a crucial role in enhancing sustainability and ESG impact in the sector.  

Recognising the importance of ‘being green’, professional bodies, such as the British Dental Association (BDA), are starting to seriously evaluate and endorse practices that prioritise these principles - working towards establishing sustainability and ESG standards for dental businesses. Achieving these certifications demonstrates a practice's commitment to responsible and ethical practices, giving patients confidence in the care they receive. 

PRICING  

Reverberations since the mini-budget in September 2022, including the ongoing workforce challenges collectively instigated a strategic reassessment amongst buyers in the dental sector, particularly the dental corporates. Consequently, many chose to moderate or temporarily suspend their acquisition plans, a sharp contrast to their aggressive growth in 2022. As a result, we saw a 6.4% decrease in average pricing in 2023, with the market subsequently undergoing a constructive and healthy recalibration. Stability has been restored in pricing, signalling a new phase of equilibrium and resilience. 

THE YEAR AHEAD  

In 2024, we expect to see: 

• The transactional volume within the market to rebound. However, it's anticipated that these levels will still fall short of the peak witnessed in 2022. This forecast suggests a gradual recovery and stabilisation of market activity, moving towards a more sustainable pace in comparison to the heights reached during the market's zenith.  
• M&A activity from corporate operators will reflect a strategic recalibration, with these entities showing restraint in their investment choices and a heightened focus on long-term value over immediate expansion.   
• During a period where corporate entities are exercising enhanced selectivity in their acquisitions, experienced multi-site independent operators and first-time buyers are poised to capitalise on this opportunity. This scenario presents a prime opportunity for these operators and newcomers to expand their foothold in the market and establish a stronger presence.  
• Some group operators will continue with strategic plans to review and divest underperforming or non-core sites, reflecting a focused effort to streamline their operations and enhance overall efficiency.  

​For the full Business Outlook 2024 report, which also includes an interview between Jason Wong (Interim CDO England) and Paul Graham (Managing Director – Medical at Christie & Co), visit: https://www.christie.com/news-resources/business-outlook/2024/