Anyone who works closely with independent pharmacies will tell you the same thing: this is one of the most financially squeezed sectors in the UK right now. And it’s not just anecdotal. A recent survey by the National Pharmacy Association, reported in The Daily Telegraph, found that of 420 pharmacy owners surveyed, nearly half are contemplating closing their doors altogether, while 55% are considering relocating to cheaper premises. For an industry that sits at the heart of local healthcare, particularly in rural areas, that’s a sobering statistic.
In this blog, Sara Dennis, Account Director and Pharmacy Specialist at Bevan Buckland, looks at why independent pharmacies are under such sustained financial pressure, and what owners can do to protect their position while a longer-term funding fix is worked out.
Why Is This Happening?
At the root of the problem is a simple mismatch: costs are rising, but income isn’t keeping pace. Business rates are a big part of that story. Unlike a shop selling clothes or coffee, a pharmacy can’t simply put a few pence on the price of a prescription to cover a higher rates bill: most of their income comes from NHS-set fees and reimbursements, not prices they control. So when overheads go up, there’s no lever to pull. The NPA has been clear that many family-run pharmacies are simply absorbing costs they cannot pass on.
Add to that:
- Static or falling NHS funding settlements, relative to inflation and wage growth.
- Rising staff costs, particularly following recent increases to the National Living Wage and employer National Insurance.
- Medicine supply issues, which can leave pharmacies buying stock at a loss when reimbursement prices lag behind real-world purchase costs.
- Energy and property costs, which have not returned to pre-2022 levels.
Individually, each of these might be manageable. Together, they’re squeezing margins to breaking point, and it’s the smaller, independent, often rural pharmacies that feel it first, precisely because they don’t have the buying power or diversified income of the larger multiples.
What Does This Mean in Practice?
Think of a pharmacy a bit like a small manufacturer that’s told exactly what it can charge for its product, regardless of what its own costs are doing. If the price of your raw materials, your rent, and your wage bill all rise, but your selling price is fixed by someone else, your profit margin doesn’t just shrink: it can disappear. Many pharmacy owners are living that exact scenario right now.
The wider risk goes beyond any one pharmacy closing its doors. If pharmacies close or relocate away from town centres and villages to save money, it’s often the elderly, less mobile, or rural populations who lose easy access to essential healthcare services, exactly the communities pharmacies were originally set up to serve.
What Can Pharmacy Owners Do Now?
While the funding model itself is a matter for Government and NHS negotiations, there are still practical steps owners can take in the meantime:
- Review business rates liability: check eligibility for small business rates relief, or reliefs specific to healthcare premises, and challenge valuations where premises have been incorrectly banded.
- Model cash flow rigorously: with NHS reimbursement timing lags a known issue, robust short-term cash flow forecasting is essential to avoid being caught out.
- Consider structure and succession planning early: for owners weighing up relocation, sale, or scaling back, understanding the tax and valuation implications well in advance gives far more options than leaving it late.
- Benchmark costs against peers: often the areas of overspend aren’t obvious until compared with sector data.
- Diversify income where possible: private consultations, vaccinations, travel clinics and minor ailment schemes all sit outside the NHS-set fee structure and can help offset margin pressure on the dispensing side of the business.
- Review supply chain and purchasing arrangements: joining or renegotiating terms with a buying group can improve purchasing power on medicines and reduce exposure to short-term price spikes.
- Check the VAT position carefully: pharmacies often deal with a mix of zero-rated NHS dispensing and standard-rated retail sales, and getting the partial exemption calculation wrong is a common, costly mistake worth reviewing with a specialist.
How We Can Help
At Bevan Buckland, we work with a number of independent pharmacies across Swansea, Haverfordwest and Pembroke, and we’re seeing these pressures play out first-hand in the numbers. If you’re a pharmacy owner concerned about margins, rates, or what the future holds for your business, it’s worth having that conversation sooner rather than later; the earlier you plan, the more options you have. Please get in touch by emailing mail@bevanbuckland.co.uk or calling 01792 410100 to find out more.
Source: National Pharmacy Association survey data, as reported in The Daily Telegraph, “Pharmacies at risk due to rates.”
