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What a UK recession could mean for health tech

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After this week’s headlines that the UK “has already tipped” into a recession, we look at the possible effects on the health tech sector…

When former BOE rate-setter Danny Blanchflower said that the UK is probably “already in” a recession, there was a shared underground rumble felt across the country. What was generally seen as a “maybe” is undeniably becoming, by all accounts, extremely likely. 

As businesses across all sectors prepare for a change in economical weather, health tech bosses know their sector will be no exception. A recession, after all, does not discriminate, and it’s worth planning out the possible effects on your business where possible. 

Has it really already started?

When Danny aired on BBC’s radio 4, he said: “The UK in all likelihood is already in recession. 

“The right thing to do is to sit back and wait and watch as the global recession probably spreads.”

It was reported that investors and analysts believe the UK central bank will deliver its biggest rate rise in 27 years, accelerating its effort to rein in prices that are rising at the strongest pace since the early eighties. 

Danny added: “In 2008, people denied a recession was coming and said all we had to worry about is inflation.

“We’re probably all going down into recession together. A 1% rise in unemployment hurts people much more than a 1% rise in inflation in terms of pain and sadness.”

Digital health in an economic downturn

As previously reported by Health Tech World, digital health may stand strong amid the storm – not least because of record profits, new innovation and reduced spend. 

Medisafe founder and CEO Omri Shor said: While the economy may be slowing, in the digital health arena we see spending shifting from new digital health startups to more established solutions that have extensive results and clinical evidence that prove their effectiveness.

“Venture capital firms are still investing but are opting to be more strategic with their funds to support digital health solutions that are gaining traction in the market.

“Funding may be reduced, but some of that comes from an increase in collaborations among health care systems, pharmaceutical organisations, and key players who are securing major deals with digital health solutions.

“As the larger health care industry starts to galvanize around the use of digital health as an essential tool, more money is being invested into comprehensive digital solutions.”

The effects on health tech 

Analysts at RBC Capital Markets and William Blair claimed that medical device companies are set to curb their spending at the back end of 2022, in an attempt to “prepare” for a coming recession. 

They told Medtech Dive “Companies are listening to the market and understanding investor concerns on cash burn to the point where it is impacting management teams’ spending initiatives (many are pausing on certain more ambitious projects), and companies are laying out paths to profitability for investors.”

“This was more explicit in presentations and breakouts than in any year we have seen. This is not terribly surprising but is it still good to see that awareness of the situation.”

Startups

Health tech startups are urged to prepare now for what is looking more and more like an inevitable downturn. According to tech engineer Greg Kemnitz, a recession “isn’t a bad thing” for early startups. 

He told Quora: “It depends on the life phase of the startup. A recession isn’t a bad thing for an early-phase startup, particularly one that is still getting its product to work. This is especially true for startups making enterprise products, as development may take a good while. 

“The startup may be finishing up its product just as the recession ends and businesses start buying again.

“Consumer-facing startups that don’t have terribly complicated products may have a harder time if a recession starts, particularly if the recession dries up venture capital.”

Have your say – how would a recession affect your health tech business?

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  1. Pingback: Medtech is “not immune” to the coming recession of 2022

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