Signify View: Impact of Brexit on HealthTech

• On 23rd June 2016 the UK public voted to leave the European Union (EU)
• The Ways extraction process for the UK leaving is still unknown creating future uncertainty on UK trade relationships and medical device regulation
• The UK National Health Service (NHS), the largest procurer of medical devices and healthcare IT in the UK, is now at risk of further budget cuts and staffing crisis
• Initial repercussions of Brexit will impact wider EU medical device and healthcare IT market
• The UK leaving the EU will create a challenging market environment in the short- to mid-term for both the UK and EU healthcare technology industry

The Signify View
The planned UK exit from the European Union will have far-ranging consequences for the medical device and healthcare IT industry. At this early stage, the detailed implications are unknown and are not possible to accurately predict. However, we see strong evidence based on current market feedback and guidance to suggest the medical technology industry in the UK and EU will be affected, especially in the short to mid-term outlook. Below, we focus on three factors we see as having the most important impact over this period:

Macroeconomics and market demand
The largest concern for the healthcare technology industry will stem from current and future macroeconomic uncertainty. Health spending (both public and private), device and IT procurement and consumer demand are all closely linked to the performance of the healthcare technology industry.

In Europe, market demand has been slowly recovering following the EU financial crisis and subsequent recessionary period. However, with the vast majority of economic forecasts suggesting “Brexit” will lead to slower UK GDP growth, economic uncertainty and currency fluctuations (as seen by the initial drop in the British pound and Euro following the result), future economic climate will remain challenging. This will therefore lead to impacts on the health technology industry, including:

• Further austerity measures for public healthcare; review and limitation of healthcare spending budgets
• Likely postponement or cancellation of public and private health infrastructure projects
• Slower development of public digital health and health IT initiatives
• Longer life-cycle of currently installed equipment and networks

Furthermore, the UK is a top three market (by annual revenue) in Europe for medical imaging equipment and healthcare IT. If (as described below) the UK market is slowed down by a lengthy extraction from the European Union, growth of the European market overall will be impacted.

NHS procurement and staffing
The UK NHS is by far the leading procurer of medical devices and healthcare IT products and services in the UK, accounting for over 80% of demand. However, it is already undergoing significant cost-cutting to meet recently imposed financial targets by 2020. When considering this against the worsening economic outlook (as described above), further cuts or procurement restrictions are to be expected.

While details of specific impacts from Brexit for the NHS are not yet clear, we see the biggest short- to mid-terms impacts as follows:

• Health IT implementation: smaller scale trust-level investment will continue, albeit slower; larger scale regional and national IT and data sharing initiatives postponed or cancelled
• NHS staffing resources: the NHS employs tens of thousands of EU-migrants in clinical roles; Brexit has created uncertainty surrounding the future rights of these clinicians to live and work in the UK. Initial reports suggest recruitment to attract EU clinical staff is already more challenging post Brexit, risking further clinical staff shortages.
• Digital health programmes and trials: recent remarks fromthe CEO of the NHS in June 2016 outlined expansion plans for the use of digital health technology. However, with NHS funding under greater pressure, the scale, speed and volume of initiatives may be impacted.
• Research and innovation: The UK is the leading receiver of EU funding for science and technology research (medical technology included). The decision to leave the EU has created uncertainty over the continuation of research funding in the UK.

UK trade and device regulation
The consequences of UK extraction from the EU could also significantly slow import and trade of medical devices and healthcare IT. As it stands today, all product regulations for devices are determined by EU-wide legislation. Reviewing and deciding whether to keep or amend EU regulations for the UK market, will therefore need to be carried out by the UK Ministry of Health. This process will involve individual review of thousands of standards and regulations, by a public department with plans already in place for staff reduction.
The likely outcome will be a slowing of device import (both from the EU and non-EU global markets) and in particular, slower market-entry into the UK for devices and services that require new standards or regulation. While some recent commentary does suggest the simplest approach could be to accept all current EU regulation as UK standards to ensure continuity, the complexities and legal implications of this approach have yet to be fully defined and explored.