UK expenditure on dentistry is expected to have increased year-on-year over the last five years, increasing by a cumulative 17% between 2012 and 2016 - ending the review period at £9.6 billion. Approximately 30 million people receive dental treatment from the NHS in England, with more than 40 million courses of dental treatments undertaken by dentists per year.

Figure 1: UK Expenditure on Dental Care, 2012-2016

(£ Billion)

Source: MBD analysis of Department of Health, ISD Scotland, NI Executive, StatsWales data and MBD estimates

The oral health and treatment needs of the UK population have significantly changed over the last few decades. The population has risen steadily in recent years, with the ONS estimating the UK population to have grown by 976,000 from mid-2014 to mid-2016.

The NHS still accounts for the largest proportion of the sector’s spend, but has seen its market value dominance deplete on an annual basis - from a high of 45% at £3.68 billion in 2012, to an estimated low of 40% at £63.84 billion in 2016. Private general dental services expenditure has increased from £2.75 billion in 2012 to an estimated £3.35 billion in 2016. Cosmetic dental treatment, which is unavailable through the NHS, has experienced the greatest growth in expenditure levels over the review period - with a total increase of 37% from £1.75 billion in 2012 to £2.4 billion in 2016.

The demographic and structure of the industry’s workforce could significantly change over the next decade with more dental work performed by dental hygienists, therapists and nurses through the introduction of direct access measures.

Forecasts carried out by CfWI in December 2013 predicted a surplus supply of dentists in the future - ranging from between 1,000 and 4,000 dentists by 2040. Despite lower student uptake since 2010, the CfWI believes that steeper declines will be needed to close the supply-demand gap. This would help avoid potential under-employment risks and unnecessary public expenditure that may accompany oversupply in the workforce.

The profits of dental practices vary according to the services they provide for patients and the way they choose to provide these services. In March 2016, NASDAL published its statistics for dentists’ earnings over the 2014/15 tax year, which saw an increase in the gap between average profits achieved in the UK’s private and NHS dental practices. This followed last year’s statistics release, which revealed that the profit level of the average private dental practice was above the average NHS dental practice for the first time in nearly a decade.

An average private practice made a profit of £140,129 per principal, compared to an average NHS practice profit of £129,265. Since 2014, private practice fee income has increased by 8%, while NHS practice fee income has remained relatively constant. The income gap is largely attributed to private practices having greater control over their income than NHS practices.

A direct comparison of private dentistry costs is difficult because of the wide variations in private dental practice charges and because many private treatments are not available on the NHS. Anecdotal evidence suggests that check-ups can cost up to £77, while trade sources suggest private costs for equivalent band one treatments are generally around double the NHS.

Prices for a simple check-up performed by a private dentist can vary by a staggering 1,133% across clinics in major UK towns and cities. Birmingham is the cheapest city to have a dental checkup, costing an average of £31, compared to Liverpool, where the price is more than double at £77, and London, where it costs £60 on average. Private dentists are able to set charges as they choose, often reflecting the start-up costs and location of the surgery, though the General Dental Practitioners’ Association publishes guidelines for ‘reasonable’ pricing levels.

Figure 3: Average Private Practice Prices for the Five Most Common Dental Treatments, At May 2016, by Five Most Expensive Dental Check-Up Locations

(£)

Click here to zoom

Source: MBD analysis of WhatClinic.com

In the March 2016 budget announcement by the chancellor, several measures were included that will impact the industry and dentists, including: a levy on sugary soft drinks; changes to the Capital Gains Tax; changes to the corporation tax rate and; changes to Personal Allowance thresholds.

The UK’s population is increasing and ageing at the same time. These demographic changes are likely to affect both the type and setting in which dental care services are provided. The number of people aged over 85 is projected to increase from 1.4 million in 2010 to 1.9 million by 2020 and 3.5 million by 2035 - more than doubling over 25 years. Contrastingly, the number of people aged under 16 will only increase by an estimated 12% over the same period. The over-45s are likely to continue to require remedial and restorative dental work, such as replacement fillings, and will therefore have different dental care needs than the younger generation.

In March 2016, the DoH announced that NHS England dental fees would rise by 5% in 2016 and 2017 - representing the highest price hike since charges were introduced. NHS dental treatment will remain free for those under the age of 18, those under the age of 19 and in fulltime education, pregnant women or those who have had a baby in the previous 12 months, and those on qualifying low income benefits.

The most recent fee changes, effective from 1^st April 2016, increased band one treatments by 80p to £19.70, band two treatments by £2.60 to £53.90, and the cost of band three treatments by £11.20 to £233.70. These price increases exceeded the annual CPI rate for 2015, increasing concerns about affordability and whether the rate of people visiting dentists for NHS treatments will be adversely affected.

More than four-in-five dental patient’s last visit to a dentist within the last five years was to an NHS dentist, despite reports of NHS dental practices not being open to new patients and rising NHS dental treatment costs. A large number of people have visited an NHS dentist in the last 12 months (62%), while 54% said they have never had a dental appointment with a private dentist.

The youngest and oldest male respondents were most likely to have visited an NHS dentist in the last year, at 60% of 16 to 24 year-olds and 62% of the over-55s. However, the likelihood of women having visited an NHS dentist in the last 12 months increased with age - 59% of 16 to 24 year-olds, compared to 72% of the over-55s. Younger people were, however, most likely to have had a private dental appointment in the last 12 months, with 24% of men aged 16 to 24-years-old and 25 to 34 years old doing so, compared to 25% of women aged 16 to 24 and 23% of 25 to 34-year-olds.

The over-35s were more likely to visit the same dental practice than their younger counterparts, with 93% of males and 94% of females stating they intention to do so. This reflects that many people have established a relationship with the same dentist for a long period, who knows more about their specific dental care, and so are less likely to visit another practice.

Of the small sample size who said that they would not anticipate visiting the same dentist for their next dental check-up or treatment, 35% attributed this decision down to having moved, or in the process of moving, away from their last dental practice.

The proposed new NHS dental contract will provide the structural foundation for dentistry, which is likely to further increase competition in the market. Growing corporatisation has also added a further complication to market structure.

Mixed dental practices, which offer both NHS and private dental care, are becoming more common as the financial structure of such practices can be underpinned by the NHS fixed contract value.

A growing and ageing population is expected to ensure strong demand for dental services over the foreseeable future. The sector remains widely fragmented, with approximately 76% of dental practice companies having a turnover of less than £500,000 in 2015.

According to GDC register figures, there were 40,953 dentists registered at October 2015, an increase of just 28 dentists on the same month in 2014.

The four leading providers, Mydentist, Oasis, Southern Dental and Rodericks, have approximately 14.7% market share - making the dentistry sector one of the more fragmented in the healthcare sector.

The number of dental practices increased by the largest annual margin seen over the five-year review period in 2015, with 780 additional practices, equivalent to a 6% rise, added to the sector’s operations.

The number of companies in the dental practices sector rose by a review high 5% in 2015 to 11,810.

Expenditure on dental care is expected to experience fairly stable growth over the next five years, at between 3.5% and 4.2% per year, and will end the forecast period at £11.6 billion. This represents a cumulative increase of £1.65 billion, equivalent to a 17% rise, on the £9.95 billion forecast for 2017. Growth will be largely driven by private and cosmetic dentistry services as more dentists are expected to increase their private dental activity over the coming years due to a lack of belief in the provisions likely to be set out in the new NHS dental contract by 2018 and insufficient funds being available to carry out the dental duties laid out in the contract.

Figure 4: UK Dental Care Expenditure Forecast, by Segment, 2017-2021

(£ Billion at 2016 prices)

Source: MBD forecasts

Demand for cosmetic dentistry is forecast to grow faster than any market segment over the next five years thanks to the rapidly developing variety of treatments, with technology improving the quality of orthodontic and dental implants. Increasing awareness of cosmetic dental treatments and rising cultural demand for improved appearance is also expected to continue over the forecast period. However, there are signs that the ‘Hollywood smile’ trend is starting to fade, with patients seeking more natural-looking teeth that are still healthy but blend in with the rest of their face. This has been described in the industry as ‘shade-matching’ or ‘invisible dentistry’, where patients would like to receive high-quality cosmetic treatment that isn’t obvious to others.

Competing forces are expected to impact dental treatment prices over the forecast period. Advances in dental treatment technology, such as the development of ceramic implants, could cause inflationary pressure. However, the expected increase in dental operators seeking to provide private treatments, and the growing consumerist approach to purchasing dental care, will place a downward pressure on prices. As online marketing plays a more important role in customer acquisition, demand for high standard dentist interaction will increase. The fact that dentists are qualified and skilled practitioners does not set them apart from other dentists in the eyes of the patient. The level of customer service is where business can be gained or lost.