Iain Stevenson, Head of Dental at Wesleyan Financial Services, shares the top challenges faced by dentists in the current economic landscape…
On top of industry pressures that you face in dentistry, such as recruitment and retention challenges, GDC regulation and trying to reduce residual patient backlogs from the pandemic, the last thing needed is additional pressures from a turbulent economic landscape.
You will have found it difficult to miss in the media that we’re currently facing an amplified cost-of-living crisis, spurred on by a rise in energy prices and general costs of living. In fact, the consumer price index hit double figures back in July 2022 – the first time since 1982.
There are very tangible impacts for members of the dental profession, both from a personal financial perspective and for those who own their own dental practices.
Here are the top areas for consideration:
Impact of inflation and erosion of savings
High inflation is expected to be with us for some time, and much higher than the Bank of England’s target of 2%. What this means for those who have large funds sitting within savings accounts (or business accounts) is that the purchasing power of their savings is at serious risk of being eroded by inflation over time.
Interest rates have risen to 2.25% with the aim of controlling spiralling inflation. However, most people won’t have noticed a positive impact on their finances, especially with UK wage growth slowing and rising energy and food prices.
The best easy-access savings rate on the market is currently at 2.35% and it is possible to obtain a rate of 4.55% if you’re willing to lock your cash away for five years, which won’t stack up against inflation should it continue to hover at 9.9%*.
To protect your surplus savings, one way to overcome this particular financial hurdle is to think about other ways you can make use of your money. The money you hold onto as cash slowly loses its buying power due to inflation. However, by investing, you have the potential to attract higher returns over time, with the aim of at least beating inflation over the medium to long term.
The market volatility we’ve seen over the past few months may leave you questioning this approach, but it’s worth remembering that investing is recommended for long-term financial goals, to ride out economic fluctuations. Think back to other big economic events, such as the dot-com bubble in 2000, the Iraq War in 2003, the financial crisis of 2007-08, and the recession of 2009 – the markets did eventually bounce back.
Of course, it is worth remembering that investing needs to be in line with your risk appetite and it is a possibility you may get back less than you invest. It is also important to consider what access you might need to the funds, what your current and future financial position might be and your overall balance of investments.
Increased pressure on dental businesses
This is an area that is particularly vulnerable to the cost-of-living crisis with a lot of moving parts.
The rise in energy bills is a significant concern for many practices, despite the government’s implementation of the business energy relief scheme.
NHS practices in particular, who have no option but to absorb this increased cost, could be feeling the squeeze.
Diversifying income streams, potentially by specialising in certain treatments and procedures or, if you are in the NHS, considering your options within private dentistry could help you strengthen your practice’s financial foundation.
Similarly to investing in your personal finances, it’s also worth considering investing surplus funds that may be sitting in a business bank account to protect the fund from a reduction in purchasing power.
What does the crisis mean for your retirement plans?
These are the questions you need answers to, in order to secure your retirement plan from derailment during this type of economic turbulence.
Speak to a specialist
There’s a lot going on in the dental landscape that may affect your financial position and planning for the future.
If you’d like further advice on how to overcome upcoming challenges and create a projection for your retirement and savings, you can speak to a Specialist Financial Adviser from Wesleyan Financial Services as part of a no-obligation financial review.
* Correct at time of publication, rates may vary over time.