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How pharmacies can turn their finances around in a sustainable way
Pharmacies across the country are warning that soaring costs will put their businesses under increasing pressure in the months ahead.
Increases in the National Living Wage and National Insurance contributions come on top of what industry insiders claim has in effect been a pharmacy funding cut of 40 per cent over the past decade.
And already there are warnings that more high street pharmacies will close and access to medicines and health advice will decrease at a time when the NHS is telling patients that their local pharmacy is often the first place they should go when seeking medical advice.
Figures from the National Pharmacy Association show that an average four pharmacies closed each week in England during 2024. That loss of 222 pharmacies nationwide is said the be the second highest annual closure on record.
Overall, the NPA says that 700 pharmacies have closed since 2022, leaving England with its lowest number of pharmacies in two decades.
Previous statistics have also shown that independent community pharmacies are facing an annual shortfall of approximately £100,000, with a total funding crisis amounting to £250 million.
But it is important to acknowledge that there are steps that can be taken to minimise the risk of a total business collapse.
The financial stability of UK pharmacies is undoubtedly under severe threat due to a perfect storm of rising costs, including a National Insurance hike set out in October's Budget and the new national minimum wage, all coming at a time when official funding in real terms has been decreasing over the years
Up to 94 per cent of pharmacy owners now report that they have seen significant increases in costs, with almost 64 per cent saying they are operating at a loss, which is clearly not a sustainable pattern for success.
To cover rising costs and increasing losses, many pharmacies have gone down the route of taking out loans and, as a result, are now in even deeper debt.
And while it is true that the government recently announced a new funding deal raising the funding for pharmacies to £3.1 billion for the year 2025/26, many fear that this might be too little too late.
Simply closing the doors on a business is not, in the case of pharmacies, as straightforward a solution as it might seem.
We dealt with the close down of a pharmacy which had a methadone drop-in centre among its services, which meant it had to give sufficient notice to methadone users, classed as vulnerable patients, of where there was a local alternative prior to the pharmacy ceasing to trade..
Controlled drugs held at the premises of closing pharmacies need to be dealt with correctly and one option is to have them securely locked up at the pharmacy’s trading premises, before a licensed official deals with the disposal.
Agencies that have to be involved at this stage include the Medicines and Healthcare Products Regulatory Agency, the General Pharmaceutical Council and the local police Controlled Drugs officer.
Before going straight to closure, however, pharmacies could have a chance to retain their essential place on the high street through reviewing their business and looking to increase revenue and reduce costs wherever possible.
It might seem like an overly simple solution, but diversifying and increasing the range of products sold may encourage higher sales per footfall.
It’s also important to look at the services currently being offered - things like delivery options - and make a thorough investigation of how profitable they are and whether they could be streamlined or made more cost effective.
This would also be the right time to explore the restructuring of staffing levels and taking a look at the help available through the government, which offers an interest free loan to pay for redundancy costs, which can be spread over up to five years, with no security and no personal guarantees required.
In order to obtain this loan, an application would need to be made to the Redundancy Payments Service, demonstrating that the pharmacy cannot afford the redundancy costs but that the pharmacy will be able to repay the loan over the proposed time scales.
There are many other loans available to be applied for online, which might seem like a good quick fix, but often have high interest rates and subject to personal guarantees and/or security and can often have eye watering termination and default charges.
If a loan really is required, I would always recommend that a pharmacy should speak to a commercial finance expert first and our experts are always on hand to discuss borrowing options and will provide impartial advice.
Now could also be the time for pharmacy owners to consider expediting their exit strategy and/or retirement plans.
Whether considering a share sale or a solvent liquidation with the return to the shareholders, if the pharmacy owner is eligible to enjoy Business Asset Disposal Relief, this has recently risen to 14 per cent and is scheduled to go up to 18 per cent in April 2026.
Avoiding this four per cent rise next year could result in a tax saving of up to £40,000 per individual.
What nobody wants to see is another vital business disappearing from our high streets and shopping centres but I believe that prompt action and sound advice should help alleviate a crisis and preserve an essential service.
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