11/02/2026
Introduction
2025 saw record breaking transactions and sustained investment in independent health and care, with new and existing investors attracted to a sector where demand continues to outstrip supply and investment helps to shape the care delivered in our communities.
The level of deal activity was reflected in the transactions delivered by the Bevan Brittan Healthcare Finance team.
In 2025, we completed transactions for funders and borrowers delivering over £160m of healthcare development funding to directly enable the delivery of 1,600 new elderly care beds. This was alongside numerous transactions providing finance for existing care homes and operators as well as for the provision of new schools for children with SEN.
The market’s appetite for investment is expected to continue in 2026 and as we stride into the next 12 months of transaction delivery, our Healthcare Finance team, led by Kerry Gibbons (Healthcare Finance Partner) and Sarah Skuse (Head of Healthcare Real Estate), share their thoughts and the opinions of their clients and colleagues, on key themes for healthcare finance in the year ahead.
Unmet Demand Continues to Provide Opportunity
The backdrop to healthcare finance remains a persistent and unmet need for service provision.
In elderly care, for example, this is fuelled by an ageing population. Commentators note that the UK market needs 14,000 new beds per year to meet demand. However, over the last few years the sector has only delivered between 4,000 and 5,000 new beds per year, which, after a significant number of closures, leaves the rate of growth seriously lacking.
Accordingly, from the perspective of investors and funders, this represents an investment opportunity where revenue is reliable and predictable, with repeat opportunities to participate in additional and extended care provision. Demand is sustained as a result of structural and societal need rather than subject to the vagaries of commercial appetite and is little affected by saturation or competition.
Together with service provision within a regulatory framework, security provided by underlying real estate assets also provides investors and funders with additional certainty and assurance, alongside the opportunity for capital appreciation.
Derek Breingan, Head of Health & Social Care Sector of Virgin Money comments:
“At Virgin Money we are seeing continued interest and opportunity for lending in the children’s segment of social care and education. Whilst there remains some doubt as to Government intentions in the sector, in our experience, providers continue to expand to meet growing demand. SEN provision is another related area of growth for us. Much of this overall activity is real estate led as this underpins investment in appropriate, and regulated, settings.”
Dasos Kirtsides, Head of Healthcare for Shawbrook also notes:
“2025 was a real standout year for the Shawbrook healthcare Team. We supported a record number of clients across all subsectors, with particular momentum in children’s services and specialist care, where demand, quality operators and long-term fundamentals continue to align strongly. We also saw record transaction volumes and increasingly strong valuation multiples, driven in part by sustained interest from overseas investors who recognise the resilience and growth potential of the UK healthcare market. As we move into 2026, there’s a genuine sense of optimism, our pipeline is active, opportunities are plentiful, and we’re excited to back ambitious operators wherever we see the right chance to support growth”
That is not to say there is a blanket credit sanction in relation to financing healthcare assets. The sector remains a complicated one, with new and additional pressures as care enters a new era with additional operating costs, more discerning customers, fast paced changes in technology and a need to future proof the integrity of the assets, as the world eventually embraces the importance of ESG requirements. There remains, then, much for new and existing borrowers to demonstrate – an ability to overcome hurdles to scheme completion, a commitment to the environment and new standards of care and resilience in their model and service delivery.
Planning Delay and Pressure on Contractors
In the drive to deliver much needed new care settings, both through purpose-built homes and schools and through conversions of existing stock, new and existing developers remain exposed to the pressures felt in the construction industry.
Tony Throp, Head of Healthcare at Puma Property Finance notes that:
“In relation to the development of care homes, ongoing challenges include:
- planning consent delays, limiting the availability of viable sites ready for construction;
- continued construction cost inflation and the limited availability of construction staff resource;
- greater pressure on construction programme delivery and/or utility provider connection delays;
- working capital pinch points on contractors, leading to potential contractor failure; and
- pre-occupation delays [see further Regulatory Complexity and Reputational Risk below], ultimately preventing a care home opening, delaying both the opportunity to create revenue and the ability to refinance.
Encountering such risks increases holding and financing costs and whilst some of these issues are specific to site location, the issues facing developers are many and the road to scheme completion is not easy. However, in our experience experienced developers can successfully navigate these challenges.
Puma Property Finance provides reliable and flexible funding solutions to experienced property professionals across the UK, delivering loans of £10 million to £100 million (with potential to lend more by exception). With a strong focus on the healthcare sector, we are committed to addressing the shortfall of care beds across the UK. We have now funded approximately £1 billion of care homes and over 3,500 new care beds, plus our Impact Lending Framework incentivises property developers to deliver ambitious sustainability and social impact outcomes, offering up to a 1% reduction in finance costs for qualifying projects.”
Key to a developer charting the course through the storm of a development, is a constructive and open dialogue with both contractors and funders. Transaction parties are aligned in securing the timely and smooth completion of a development and early action and collaboration is in the interests of all parties. Developers with teams which work closely with their construction partners and their funders are well placed to find their way through construction delays and increased costs without adversely compromising the return on development.
Focus on ESG and Fit For Purpose
Whilst the majority of care continues to come from premises which are over 20 years old and which are not purpose built, participants in the sector and residents are driving care providers to ensure their homes and schools adopt ESG strategies.
The requirement on developers and operators to future proof their buildings and operations brings both risk and opportunity.
Those left behind will struggle to obtain investment and will likely see falling occupancy numbers as modernised and purpose-built competition increases. In contrast, those actively pursuing change are likely to benefit from energy efficiencies, time and cost savings leveraged though digital technology both behind the scenes and longer-term, in patient care, as well as securing the longevity of their homes and schools.
Mert Zabci, Head of Commercial Lending at Alpha Property Lending:
“As a lender, we are observing a notable supply-demand imbalance—particularly in England where bed capacity per population head has declined for purpose built, institutional care homes…..There is a robust and growing appetite at Alpha to support the established care home developers and operators providing high-quality care homes that provide the elderly and those in high-acuity care with a high amenity and care focused environment that is fit-for purpose, unlike many of the older generation of care homes (often conversions from residential). With such developments incorporating a wide range of features designed with the safety and dignity of residents at their core (including those with 100% wet rooms only) and offering superior ESG credentials, this future proofs the assets (for investors and operators) as well as enhancing the quality of life for service users…..
To meet the needs of more discerning customers and a chronically under-served market, we have expanded our lending criteria at Alpha Property Lending to include high acuity care lending as well as other elderly care, where in the wider market at AlphaReal we already have significant exposure to the sector via ground rent investments to some of the largest providers of high acuity care in the UK.”
Staffing
It is no secret that care providers face meaningful operating pressures both in terms of staff recruitment and retention. Increased employer National Insurance Contributions have put the spotlight on staffing costs. Yet, at the same time, appropriate levels of staffing are needed to maintain a continued and consistent quality of care provision.
As our communities adapt to a growing aged demographic and the provision of care in our communities becomes more widespread, service users and their families rightly have growing expectations for how care is delivered, with a keener interest in an operator’s policies and ethos. Where staff retention is difficult, service (and therefore occupancy) is inevitably negatively impacted.
Ashleigh Dorrington-Harvey, Co-head Corporate Healthcare and Commercial Mid-Market at NatWest shares:
“NatWest’s Future Fit analysis is unequivocal: the organisations positioned to thrive are those focused on talent retention, supply chain resilience, digital adoption and sustainability. Macroeconomic and geopolitical tensions will continue to create noise, but for this sector, uncertainty has simply become part of the operating model. The more acute pressure point in 2026 will be immigration and employment law reforms, which will materially reshape workforce availability and almost certainly push agency usage higher in a market that has enjoyed several years of minimal usage. Development appetite remains strong, but without people, occupancy can stall and limit growth. As lenders seeing strong, defined talent retention and recruitment schemes will be important.
And yet — this is exactly where the opportunity lies. UK banks are in a strong position, and as a high street lender that has never stepped away from the sector, we’re seeing clear liquidity and surplus capital ready to back operators who are prioritising quality and the fundamentals above. With more capital in the market and a broader mix of lenders than ever, well run operators with scalable, future fit models are poised to make 2026 a year of genuine possibility, innovation and transformational investment which enviably points to M&A and growth.”
Finance providers and investors will therefore continue to have a keen eye on the recruitment strategy and values of their operators, with their teams being the beating heart of care. Operators who get this right not only see rewards via the ratings awarded by regulators, they also genuinely shape the provision of care to those who are loved and cherished and in so doing change for the better, the lives of their residents and their families.
Operational Cost Inflation
In addition to questions around recruitment and retention, operators also face increased staffing costs, combining both changes to national insurance contributions and a demand for higher remuneration.
Alongside this, operators continue to feel the impact of rising operational costs, including those driven by higher utility bills and regulatory compliance.
This impacts particularly on smaller and single site operators. Whilst some of this pressure can be relieved through embracing new administrative technologies most operators have been able to chart through higher operating costs via strong occupancy figures (which have returned to pre-covid levels) and increased average weekly fees.
Satyen Shingadia, Head of Healthcare at Punjab National Bank (International) Limited notes:
“At Punjab National Bank (International) Limited (PNBIL) , we remain committed to providing funding solutions (subject to status), to operators within the care sector. Despite the continued cost increases, and various changes in the sector, operators have managed to keep abreast of all the changes and continue to provide high quality care to their residents. The lack of asset supply in the sector has led to increased buyer demand, and we are seeing acquisitive borrowers looking to expand with strong competition from a wide variety of lenders who are all open for business in this sector. This is a key sector for PNBIL with a range of funding solutions on offer.”
As we move through 2026, it will be interesting to see if operators can continue to absorb the pressure on their margins and in particular, if there is continuing capacity and appetite to do this through fee increases passed to care users.
The Importance of Investment in Technology
Another key theme for providers of healthcare finance, is how far operators will go to incorporate and capitalise on advances in technology.
A willingness (and funding available) to harness progress in digital tools, can reduce the risk of operations (from exposure to cyber security to more rigorous and systematic processes), free up valuable time for management and staff, provide efficiencies and costs savings in delivery.
Steve Fergus, Head of Healthcare at Barclays recently commented:
“To meet rising demand, operators tell us they need support to finance new equipment, expand capacity, upskill their teams, and adopt emerging technologies that improve efficiency and enhance patient care. As a long-term, sector-specialist partner with deep insight into the operational realities of healthcare, we offer flexible funding solutions for investment, refinancing, and strategic growth.
Technology has huge potential to transform the healthcare industry, and we’re already seeing that shift take shape. Barclays Business Prosperity Index shows a clear rise in tech investment across the sector, with average spending up 20% in 2025 compared to last year – and I expect that momentum to continue….…..
Most of the providers I speak to have already adopted technology to streamline their back-office processes. By automating administrative tasks, they’re freeing up time and resources to spend more time on patients and improving the overall quality of care. The next big step is bringing technology directly into the care journey itself.”
For all its hard edges, technology in the care sector is not about removing humanity. It provides greater freedom and time for the end user to feel warmth of personal touch and connection and ultimately, it will bring greater preventive and proactive care. For those who are ageing it will bring greater comfort and ease and for those with SEN, technology already opens doors that might have otherwise been closed.
Regulatory Complexity and Reputational Risk
Whilst service provision within a regulatory framework and under the auspices of Ofsted and the CQC offers comfort to finance providers, the regulators are also feeling the strain.
From a diligence perspective, the lack of inspection activity (with the average age of a CQC rating, for example, being 4 years and 1 month) means reduced reliance can be placed on CQC ratings as indicators of the quality of services. This impacts both purchasers of operators and those funding them.
As a result we are seeing a need for increased scrutiny of an operator’s own internal quality assurance programmes and the use of mock inspections carried out by independent consultants, with inevitable discussions on who bears the costs and when the use of the same is appropriate.
However, the regulator is continuing to exercise its powers to carry out criminal investigations which, in the event of prosecution, can result in significant fines and reputational damage, meaning it remains important to look into material safety incidents as part of any due diligence.
Operators will conversely be keen to impress on investors the reality of the care services it provides which by their nature carry risk and incident. Whilst the regulator may carry out numerous criminal investigations relatively few end in prosecution. There is a compromise to be found in the nuances of transaction documents balancing the potential impact of the regulators powers and acts and the shades in between, which carry low reputational risk and limited impact on occupancy (and so the ability to service debt).
The Pace of Market Consolidation and Institutional Investment
Whilst data shows that investment in the sector hit record levels in 2025, this was driven in part by Welltower’s acquisitions of Barchester Healthcare and HC-One. Additionally, 2025 has also seen an increase in market consolidation through traditional M&A activity.
This is driven by:
- a shortage in supply, seeing operators looking for acquisition opportunities;
- smaller operators seeking relief from the pressures of the changing landscape and pressures on margins driven by increasing operational costs; and
- a recognition that scale unlocks further investment which can be harnessed to adopt transformative change through financing digital and technical projects as well as delivering improved ESG credentials.
Dan Smith, Founder and Chief Executive Officer at Broadwood Capital shares the recent commentary of his team:
“The UK’s ageing population is intensifying demand for healthcare and later living real estate, and a recent wave of high‑profile transactions is accelerating the sector’s shift toward institutionalisation.
Welltower’s acquisitive push - including its recent purchases of Barchester, HC‑One and Aria - has pushed its share of UK care‑home beds to over 10% (per latest LB figures). That scale matters. By consolidating fragmented portfolios, large capital players create clearer operating benchmarks, liquidity pathways and exit options for developers and smaller operators who have built up local portfolios. For developers, an institutional buyer can be an attractive route to exit and recycle capital; the question is whether viable alternatives exist beyond selling into large US REITs?....
Questions remain over the best routes for developer / operators to exit. Most of this year’s transactions have been via opco or propco sales, according to the latest research from Cushman & Wakefield. Such structures, while logical, do not suit all capital providers and we expect to see the financial markets respond with models that help broaden the investor base.”
Where transactions are structured other than by way of simple share purchases, CQC registration applications (and potential delays in these being processed) need to be factored into timelines and transactional document provisions. This is particularly so in the case of REIT structured deals where the structuring may involve the added complexity of dual registration of providers.
Additionally, where as a result of a REIT structured deal and US regulation, the delivery of care services is no longer provided pursuant to a traditional operating lease but via a care services agreement, existing or new property investors will need to consider the remit of their security package and the adverse impact on the level of control previously available to them pursuant to that operating lease.
Whilst the CMA’s recent announcement in relation to the recent Welltower transactions might give rise to a brief pause (or at least an intake in breath), we expect overseas investment and market consolidation to be a continued and fast moving theme for 2026, together with consequential developments in market standard documentation.
Closing remarks
2026 is set to be another exciting year for health and care with the pace of continued investment and the changing face of a sector championing the pursuit of a thoughtful ESG agenda and innovations in technology.
What we love about this market most, however, is that investors and operators are not attracted simply by margin. Those who commit are motivated in no small part by the social impact of the role they play.
This includes our wonderful funder, developer and investor clients, our colleagues, our transacting counterparts and the many professionals involved in delivering health and care projects and who we have the pleasure to work with.
Care provision will at some point touch all of us – either through friends, family or through our own personal experience. Care provided to the vulnerable, to those who require specialist support and sometimes in the darkest of times.
Many of the themes in the subject of this article are tested and considered in an analysis of credit risk and a return on investment. However, in the context of healthcare, the result is not only a secure and profitable investment, but also improved care services for the benefit of the environment, for the benefit of the staff who work in the relevant settings and ultimately for the benefit of individuals and families in need.
We are proud to be part of it.
Acknowledgements and Contacts
With thanks to the following colleagues and clients for their time and insightful contributions (in alphabetical order by surname):
- Derek Breingan (Head of Health & Social Care Sector), Virgin Money
- Ashleigh Dorrington-Harvey (Co-head Corporate Healthcare, Commercial Mid-Market), NatWest Bank PLC
- Steve Fergus (Head of Healthcare), Barclays Bank PLC
- Dasos Kirtsides (Head of Healthcare), Shawbrook Bank Limited
- Satyen Shingadia (Head of Healthcare), Punjab National Bank (International) Limited
- Dan Smith (Founder and Chief Executive Officer), Broadwood Capital
- Tony Throp (Head of Healthcare), Puma Property Finance
- Mert Zabci (Head of Commercial Lending), Alpha Property Lending
The Healthcare Finance Team at Bevan Brittan LLP is led by:
Kerry Gibbons (Healthcare Finance Partner) and Sarah Skuse (Head of Healthcare Real Estate).
If you have any queries or would like to work with us and our team of experts, please don’t hesitate to get in touch.
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