Category Archives: Investment

Key Takeaways from the Spending Review: A future that is less generous than the past

GK had the pleasure of hosting former Treasury and education minister David Laws and the Financial Times’ Economics Commentator Chris Giles in our latest webinar on Thursday (12th June) to discuss the winners and losers from the government’s spending review, and what it means for business.

The spending review is a significant moment in the political calendar. The settlements it confirms set departmental day-to-day budgets for the next three years (2026-27, 2027-28 and 2028-29) and capital expenditure for the next four (until 2029-30). It is also the moment when No.10 and the Treasury must publicly commit the funds to support their political objectives – in essence, we get to see where spending is going to be prioritised and where it is not.

In the webinar, David and Chris detailed what the spending review means for overall public spending, where the government could come undone, and the possibility of future tax rises. You can read a summary of their key takeaways below:

The spending review is not about making new money available or introducing new taxes. Spending reviews are all about the allocation of a pre-determined spending envelope which, in this instance, the Chancellor set out in the October budget last year. It does not introduce any new taxes or make new money available. Instead, it confirms what areas of public spending the government wants to prioritise, and which departments will have to be squeezed.

The departmental settlements do not represent a return to the austerity years. While the overall spending envelope is tight – especially given growing pressure on public spending across health, pensions and defence – day-to-day spending is still rising by 1.2% per year in real terms (i.e. accounting for inflation) over the spending review period. This means it is broadly in line with the departmental spending settlements put forward by various governments since 2019.

A lot of the spending assumptions depend on public sector productivity improving, which is no guarantee. Public sector productivity has declined since the Covid-19 pandemic and in 2024 it fell by 0.3%. The Office for Budget Responsibility (OBR) has historically assumed quite generous improvements in public sector productivity each year which is a key component of its overall economic growth metric.

If the OBR significantly revises down its assumptions about improvements in productivity, this could seriously impact the funds it is projecting the government will have to work with over the spending review period. This increases the likelihood of the government having to do introduce large tax rises at the autumn budget.

Defence will continue to put pressure on the government’s overall spending envelope. Since the end of the Second World War, successive governments have used cuts to defence as a means of boosting other areas of public spending, most notably health. Persistent global instability and geopolitical uncertainty means that higher levels of defence spending are likely to continue for the foreseeable future. No.10 and the Treasury will have to contend with this new spending pressure as demographic challenges continue to pile up and economic growth remains sluggish.

The NHS is the big winner from the spending review, albeit with a smaller settlement than it has historically received. Health secretary Wes Streeting will undoubtedly be the happiest around the Cabinet table following the confirmation of the Department of Health and Social Care’s settlement, with spending on the NHS set to grow by 3% per year in real terms. However, this is below historic average rises of approximately 4-5%. With a growing elderly population and people living with complex conditions for longer, the funding put forward in the spending review settlement is unlikely to significantly move the dial on the performance of the NHS.

Small tax rises are likely at the autumn budget to meet the Chancellor’s fiscal rules. The government has committed to meet day-to-day expenditure through its own revenues by 2029-30. This means its current budget will have to be in balance or surplus by the end of the decade, and any money the government does borrow will be to invest. If the OBR projects that the government is not on course to meet this fiscal rule (or any of its others), then Chancellor Rachel Reeves will be forced to come back for a second round of tax rises or decide to break a fiscal rule. Either look fairly unpalatable to the government given where they currently are in the opinion polls.

A cabinet reshuffle should be expected in the second half of 2026 as the government begins to ramp up to the next general election. 2026 is projected to a big election year in the UK. Elections are due to take place for the Scottish Parliament and Welsh Assembly, along with a series of newly created unitary authorities. Should the results prove poor for Labour, as current polling indicates they will, then Prime Minister Keir Starmer is likely to reshuffle his cabinet to get his top team in place as the No.10 machine starts to think about the next general election in 2029.

Health and welfare reform – will work, work?

The government has made its stance on health and welfare clear. The overarching narrative underpinning the Department for Work and Pensions’ (DWP’s) green paper on welfare reform, published in March 2025, is ‘good work is good for health and being out of work can worsen health’.

Coupled with the Secretary of State for Health and Social Care Wes Streeting’s recent comments that an over-diagnosis of mental health conditions is preventing people from working, it is evident that the government sees work as a key component of the welfare state.

This marks a distinct shift in how work, health and welfare have historically interacted in policymaking. Where once the welfare system was seen primarily as a safety net, it is now being recast as a springboard that supports individuals back into the labour market.

The government recognises that something has shifted in the labour market post-Covid-19. There has been a 45% increase in health-related benefits claimants since 2019-20 and more than 9.3 million people out of work. There are swathes of statistics which demonstrate that Britain’s workforce has not fully recovered from the pandemic and the current level of sickness and absenteeism is unsustainable.

Given the scale of the issue, the government has sought to identify how improving health outcomes might support people into work and enable them to stay there. Ideas such as offering weight loss jabs, dubbed ’jabs for jobs’, were floated at the end of last year. This gives a clear signal that the government is keen to encourage people back into the workplace and is open to non-conventional methods of doing so.

While DWP consults industry and businesses on its planned welfare reforms, an opportunity has arisen for those focused on supporting the government’s vision for work and welfare. Employers should be prepared to play a larger role in supporting the workforce to remain engaged in the labour market. This offers significant opportunities for occupational health providers who can support employers to promote the health and wellbeing of their staff.

Schemes such as mental health and wellbeing programmes will become increasingly common in employment offerings as businesses take on a growing role in a broader, work-led approach to welfare. Occupational health providers who can help fill this gap between welfare, health and long-term employment are well placed to help facilitate the government’s policy objectives.

Reducing economic inactivity is a key priority for the government in its mission to kickstart growth. By implementing supportive workplace schemes and collaborating with private occupational health providers, employers can not only improve individual outcomes but also contribute to broader societal and economic resilience.

The question now for policymakers is exactly how occupational health providers can support businesses to deliver on the government’s objectives for welfare reform. Ministers, civil servants and parliamentarians are keen to understand the art of the possible and how they can work with providers to support workers to remain as active participants in the UK’s workforce.

Please contact Lauren Atkins (lauren.atkins@gkstrategy.com) if you would like to discuss occupational health and the government’s welfare reforms in more detail.

GK Strategy in Conversation with Steve Brine and Richard Meddings

GK Strategy was pleased to host former Chair of NHS England Richard Meddings and former health minister and Chair of the Health and Social Care Committee Steve Brine for an ‘in conversation with’ discussion on Thursday 15 May to examine some of the challenges facing the government, the Department of Health and Social Care and the NHS 10 months into Labour’s term in office.

Meddings and Brine took a deep dive into a range of issues affecting the health and social care sector, exploring the implications for investors and service providers. From funding pressures to the abolition of NHS England, the discussion drew on our speakers’ extensive experience to evaluate the road ahead for the health system and the reforms the government will need to deliver to meet its ambitious policy objectives.

Much of the discussion focused on the NHS and the role of ICBs in a reformed health system following the announcement that NHS England would be abolished. There was agreement that health secretary Wes Streeting had received a tough inheritance, including mounting pressures on the health service and a poor fiscal climate making a significant injection of additional funding unlikely. The panellists highlighted the urgent need to redesign governance frameworks that better meet the demands of a modern health service.

Meddings and Brine spoke in detail about the role of technology in reforming the delivery of healthcare. They agreed there needs to be a steady stream of investment to maximise the increasing role AI will play in improving patient care and delivering efficiency savings within the NHS. The pair emphasised the need for Streeting to secure the ear of Chancellor of the Exchequer, Rachel Reeves, who they argued will need to prioritise health targets despite a constrained financial budget.

The two panellists agreed that reducing the elective care backlog and meeting the 18-week referral to treatment target was the key retail offer to voters at the general election and will be the main health priority for the government. This is despite wider initiatives that might have more significant long-term outcomes for the health of the UK’s population. Other short-term priorities for the NHS that were discussed included reducing the number of people in urgent care, increasing access to primary care, and improving cancer detection rates.

Towards the end of the session, the discussion shifted to the upcoming 10-Year Health Plan which will set out the government’s healthcare reforms in detail. Meddings and Brine agreed it is likely to prioritise prevention, the shift from hospital-based to community care and greater digital integration, which were the three ambitions put forward by Labour pre-election. The panellists highlighted that meaningful progress will depend on early intervention strategies and targeted investment, particularly in tackling obesity, cancer and mental health challenges.

For investors and stakeholders, the panel’s message was clear: steady investment in health, coupled with a pragmatic embrace of technology and AI presents a significant opportunity to reshape the delivery of healthcare at a time when demands on the NHS continues to rise.

Health, social care, and life sciences is one of the GK’s core sectors. GK supports a range of businesses and investors to navigate the political, policy and regulatory landscape and help them to realise their commercial objectives. Please get in touch if you would like to discuss the impact of politics and policy on your business or investment decisions.

Roundtable discussion: A collaborative and child-centred approach to children’s social care

In April 2025, Christie & Co, Compass Carter Osborne, and GK Strategy hosted a female-led roundtable discussion on the challenges in the children’s social care sector across England and Wales. Here are the key takeaways.

For a roundtable event held in April 2025, hosts Hannah Haines (Head of Healthcare Consultancy, Christie & Co), Michâela Deasy (Head of External Communications, Compass Carter Osborne) and Lizzie Wills (Senior Partner & Head of Private Equity, GK Strategy) were joined by some of the biggest female names in the UK children’s social care sector.

The roundtable brought together operators, lawyers, investors, and sector experts, all of whom share a passion for quality healthcare and for driving an increased awareness of the challenges faced by operators across the country.

Below are some of the key highlights from the discussion.

THE INTRODUCTION OF PROFIT-CAPPING IN CHILDREN’S SOCIAL CARE AND WHAT THIS MEANS FOR THE SECTOR

Overview

Ahead of last year’s election, Labour pledged to reform the children’s social care system to improve the outcomes of looked-after children and those in care, and to address the funding crisis in the system following years of local authority funding pressures.

As part of the King’s Speech in July 2024, the government announced its plans to introduce the Children’s Wellbeing and Schools Bill, which formed part of its legislative programme of over 40 new bills. One of the most controversial elements of the Children’s Wellbeing and Schools Bill was announced the following November; the ability of the government to intervene directly in the market to introduce a profit cap on providers.

Concerns about excess profit-making in the children’s social care sector are not new, and the sector has historically done a good job at engaging with the government about why the fees charged by the independent and private sectors are typically higher than those provided by local authorities. This includes the complexity of the placements provided, with the private and independent sector providing a higher proportion of placements for children with highly complex needs, often where they need additional therapeutic support, or one-to-one care. The private sector also takes a higher number of children who have already experienced several placement breakdowns in local authority provision. The ability of the sector to be able to make a level of profit allows it to reinvest in meeting quality standards, hiring and training staff, and delivering new settings, often at the request of local authorities who are struggling with high levels of demand.

The Government has been clear that it does not intend to introduce a profit cap immediately and will only do so if its broader package of measures is unsuccessful in tackling what it sees as ‘unacceptable profiteering’ and rebalancing the market. There will also be a detailed public consultation before anything is implemented, including discussions specifically with local authorities and providers.

If the profit cap is implemented in the future, providers will be required to submit an annual financial return to the government to enable their profit levels to be assessed. Again, details are limited in terms of what information will be included in these returns. Details will also be subject to consultation with final plans set out at a later date. Should enforcement action need to be taken against a provider, this will be in the form of fines, the maximum amounts of which are expected to be set out in the subsequent secondary legislation.

Views from around the room: What will profit capping mean for the sector?

The Government might say it’s not against profit making, just against ‘profiteering,’ and that the steps it is taking are necessary to address the latter. The consensus is that the government’s approach to having a profit cap as a backstop in the new legislation will be a useful tactic to encourage providers to reinvest their profits into delivering better outcomes for children and young people, despite the potential for causing short term uncertainty.

It might be comforting for providers to know that, if the Government does implement a profit cap, it is expected to take several years to go from ambition to delivery, given the complexities involved. Significant parts of the mechanism will need to be set out in secondary legislation, and many of the details that are yet to be ironed out will be controversial, including how profit will be determined for the cap, and if it will be per placement, per business or per setting (or indeed based on some other metric).

Banks are watching the sector closely, but invested funds (especially impact funds) have a continued interest. Investors that are likely to do well are those that are reinvesting profits back into the UK healthcare infrastructure. However, smaller organisations may struggle to scale due to dampened investor interest, raising questions about how they can demonstrate ROI to investors and build an investment case.

In its 2022 report on children’s social care in the UK, the CMA acknowledged that comparing costs in the sector was complicated by differences in the needs of children placed in different settings and variations in how costs are calculated and reported. Rather than focusing on profit, which loses sight of the child, participants at the roundtable agreed it should be based on the outcomes and progression of the child. It should be a partnership, with everyone working together.

This was echoed around the room, alongside the challenges in measuring outcomes using such methods as the BERRY approach which matches needs against costs. Every looked-after child undergoes reviews to ensure outcomes are measured. A universal framework for evaluating providers based on outcomes rather than profit was seen as a potential solution that government should consider. The sector is well placed to advise the government on how approaches to date have worked, and how they could be refined in future.

We have already seen changes in Wales through its Eliminate Agenda, whereby it became the first nation in the UK to legislate to prevent profit-making by private companies in relation to children’s residential and foster care services by 2030. The Health and Social Care (Wales) Act 2025 received Royal Assent in March 2025 and mandates that children’s residential and foster care services be provided exclusively by local authorities, charities, or not-for-profit organisations.

Wales can serve as a case study for England. The sector in Wales is very prescriptive about what can and can’t be done by providers. The Welsh Government is now considering the role cooperatives could play in the delivery of services and they’ve pushed back the final stage in the roll-out of the plan by three years (to 2030) A lot of what is happening is political and their agenda is quite clear, so England would be wise to keep a watchful eye on what is happening over the border.

What action should be taken?

  • The consensus around the table was that we need to evidence the positive outcomes the private and independent sector is delivering for children and young people, to counter negative perceptions around profit-making. There was agreement that the sector has historically not been sufficiently vocal in making this case, and demonstrating the excellent outcomes it supports across a group of vulnerable individuals and their families.
  • The focus should be on positive outcomes for children, not profits – so providers, parents, the government, and the media all need to work together to lift up the sector and highlight the amazing work that it does for each child, keeping in mind that the outcomes for each will be different.
  • There is a continuing lack of constructive dialogue between some Local Authorities and operators throughout the health and social care space. The sector must focus on demonstrating positive outcomes and maintaining strong relationships with local authorities to navigate the ongoing political changes.
  • Any new policy must be outcomes-focused, fit for purpose, workable in practice and designed and implemented after full consultation with the sector.

INVESTMENT IN THE SECTOR AND ONGOING COMMUNICATION ISSUES IMPACTING PROGRESSION

Views from around the room: What could the children’s services sector be doing to improve communications between the Government and operators?

The landscape of children’s services is marked by a myriad of challenges and opportunities, particularly in the context of collaboration, funding, and policy implementation. Despite numerous operators striving to collaborate and communicate effectively, the sector is often met with negativity, largely due to underfunded government spending across all areas.

A significant issue is the lack of focus on the child. There is insufficient engagement from government with the private sector, and the narrative needs to shift to place the child at the centre of all decisions. When the child’s needs are prioritised, quality naturally follows. However, there is an imbalance as each child and business is different, and policies are often rushed through without adequate consultation with operators.

An immediate concern is the sustainability of providers amidst declining fostering rates and increasing care needs. Many smaller businesses are at risk of not surviving due to these pressures. Perceptions that mainstream education settings continue to struggle to support those with lower-end spectrum needs is driving an increasing number of parents who feel they are left with no other option but to seek Education, Health and Care Plans (EHCPs) and external support, resulting in an increasing demand for specialist support on the lower end of the scale. The government’s current policy agenda around mainstreaming and inclusivity for children with less complex SEND is an attempt to address the ‘drift’ towards specialist schools.

It was also highlighted that, amidst funding challenges, local authorities are focusing on immediate budgets rather than long-term savings and the positive impact on the child that could be achieved through early intervention. The debate around profiteering stresses that higher margins do not necessarily equate to higher quality, nor do lower margins imply lower quality. The goal should be to support the child’s needs, improve outcomes, and subsequently lower the costs of provision. However, the primary challenge remains budgetary and funding constraints faced by local authorities.

Bespoke solutions, such as tuition hubs for children close to re-entering mainstream education are essential. These hubs can provide tailored support to ensure a smooth transition back into the school environment.

What action should be taken?

  • The sector must focus on child-centric approaches, effective collaboration, and innovative solutions to navigate the current challenges. By prioritising the child’s needs and demonstrating positive outcomes, the sector can build a stronger case for adequate funding and support. As a provider, if you can demonstrate where money is being reinvested to drive up quality and outcomes, that’s a useful and constructive addition.

LEADERSHIP AND AN EFFECTIVE MANAGEMENT STRUCTURE IN HEALTHCARE BUSINESSES

As demand for high-quality, specialist care continues to grow, how can management navigate the complex environment, mitigate risk, secure investment, and ensure sustainability and innovation within the sector?

Investors in this space are showing a notable shift in appetite. While continuing to focus on identifying future leaders from within the sector – whether for CEO, CFO, or CPO roles – they are increasingly looking beyond traditional industry boundaries to source talent. This reflects a growing recognition of the need for financial and operational strategies to evolve with rising demands, including revenue diversification.

Take the Chief People Officer (CPO) role, for example. The CPO’s mandate is to foster a culture that attracts and retains a diverse team – one that is calm, focused, driven, and open to embracing technology, with a strong understanding of risk and quality outcomes.

Similarly, today’s CEO must be multifaceted, a strategic leader with deep experience in execution, a keen understanding of risk, and a strong focus on quality. They must leverage technology that delivers real value, foster a purpose-driven culture, understand competitors and market dynamics, and prioritise meaningful metrics and KPIs. Above all, they must lead with empathy and drive a people-first agenda.

Views from around the room: What does strong leadership look like to you?

  • Not losing sight of why you’re there creates a robust culture
  • Trust. Being able to challenge one another at every level is healthy and creates a stronger business
  • Need a passion for the sector itself and an understanding of what internal and external drivers
  • Someone who has risen through the ranks, who is an inspiration to others and brings about a strong, positive culture
  • While knowledge of the sector is beneficial, it’s not necessarily the case that the best talent is a sector specialist. Sometimes it’s about looking more broadly at the talent out there that could be great at driving leadership
  • Someone with an inherent entrepreneurial quality who can find a solution to a challenging landscape without diluting what the business is set to achieve
  • A leader who takes real-life stories back to the boardroom, reminding the corporate team that it’s not just about the numbers, it’s about bringing the personal element back

To find out more about the changing landscape of the children’s social care sector, or to join the team’s next roundtable event, contact:

Lizzie Wills: lizzie.wills@gkstrategy.com

Hannah Haines: hannah.haines@christie.com

Michâela Deasy: michaela@compasscarterosborne.com

Tariff climbdown offers Trump an off ramp, but uncertainty remains

History repeats itself. An adage the US President and his team of advisers would do well to heed.

In 2022 the radical tax cutting budget announced by Liz Truss’ government sent yields on UK gilts spiralling out of control, with the 10-year gilt yield increasing by the largest amount in a single day since the 1990s. The Bank of England had to intervene with emergency bond purchases to prevent a collapse in the pension fund market.

This market crisis ultimately had profound political consequences, with Kwasi Kwarteng being removed as Chancellor after just 38 days in office, and the end of Liz Truss’s premiership following soon after, making her the shortest-serving Prime Minister in UK history at only 49 days.

The episode highlighted how sensitive financial markets can be to fiscal policy decisions, particularly when they raise concerns about a country’s debt sustainability or when policy changes are announced without adequate preparation or buy-in from the market.

We can look further back to understand the might of the bond market. President Clinton’s economic adviser, James Carville, said: “I used to think that if there was reincarnation, I wanted to come back as the President or the pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.” This has arguably proved to be the case for President Trump – despite trillions being wiped off the stock market, it was rising yields on US Treasury bonds that forced him to blink.

The President claims that the decision to pause the new reciprocal tariff regime for 90 days was the result of 75 countries contacting the White House to express willingness to negotiate trade deals. This narrative creates a potential blueprint for a further watering down of tariffs once the pause ends. Trump has created some leeway to say that after successful negotiations countries will no longer be “ripping off” the United States and will point to his tariffs as a masterstroke in political and economic diplomacy. This exit strategy, however, may come too late to repair the damage done to the international economic and geopolitical order that Trump’s approach is likely to leave in its wake.

This short reprieve, as it may still turn out to be, is creating major issues for the global economy, with financial markets in a state of flux trying to pre-empt and then respond to Trump’s next move. The political and economic uncertainty of the next three months will be difficult to navigate, particularly for multinational businesses with complex supply chains.

UK Prime Minister Sir Keir Starmer has already acknowledged that fixating on whether the UK can negotiate the removal of its own 10% tariff is almost irrelevant, given the potentially more serious impacts the UK could face in the event of a global economic slowdown. A trade war between the two biggest global economies – the United States and China – would have far reaching implications that no country would be able to insulate itself from. The Bank of England has already warned that supply chain disruptions would be expected to weigh heavy on UK economic activity.

This all creates a big headache for the Chancellor of the Exchequer, Rachel Reeves. Having had to make some politically unpopular decisions in recent week to restore the £9billion of fiscal headroom she identified in the autumn budget in October, she could once again find this headroom wiped out as UK growth is revised down. There is already speculation about HM Treasury’s potential response. Tax rises, more spending cuts, or additional borrowing are the options, and none of them are politically palatable.

The global economic challenges have already had an impact on the machinery of government. The Prime Minister has removed two key people from the Number 10 policy unit as part of efforts for the government to speed up economic growth and policy delivery. In the coming weeks it is likely the government will bring forward the publication of the government’s Industrial Strategy (originally scheduled for publication alongside the Spending Review in June) to demonstrate that the UK is open to business and ripe for international investment. The government has also shown a willingness to support industries that are exposed to tariffs.  In anticipation of tariffs coming into effect, Starmer announced a watering down of regulations relating to electric vehicle sales targets to provide manufacturers with some breathing space. We are likely to see additional measures announced as the government continues its consultation with business on the impacts of higher tariffs, and what the UK’s response should be.

The government is facing a significant challenge to its central mission to grow the economy and raise living standards. A renewed emphasis to go further and faster in the delivery of its reform agenda, does, despite the doom and gloom, offer an opportunity for businesses. Policymakers are firmly in listening mode. Businesses that can offer solutions to the economic pressures the government is facing, as well as a commitment to investing in the UK, will find a welcoming ear.

The next few months will undoubtedly be challenging and uncertain. However, a renewed collaboration between the public and private sector to navigate these turbulent times has the potential to offer a pathway for the UK to position itself as a top destination for investment and business growth.