When Every Pound Matters: How Social Care & NHS Providers Can Compete Under Rising Costs | Impact Guru

Workforce costs keep climbing, HMRC is tightening VAT structures, overseas recruitment is harder, and commissioners still expect better outcomes for the same (or less) money. This long-read breaks down the cost pressures hitting providers in 2025 and—crucially—the practical playbook to protect margins, evidence value, and keep winning tenders.

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1) The Cost Landscape in 2025: What’s Changed—and What Hasn’t

Wages and on-costs. Pay remains the single biggest driver of spend. The National Living Wage rose to £12.21 in April 2025, according to government announcements, with the Low Pay Commission noting sustained upward pressure on rates for 21+ workers. This lifts the whole pay spine and compounds costs for nights, on-call, travel time and supervision. (Source: national coverage of NLW changes.)

Vacancies, turnover, and agency. Skills for Care reports that, while vacancy rates eased from pandemic peaks, churn remains structurally high and the sector still requires substantial new starters each year just to stand still. Every percentage point of churn adds recruitment, training, and continuity costs—and undermines tender scores tied to stability and outcomes. Strengthen your reuse and evidence base with a structured Bid Library & Process Design and cut wasted pursuit with a disciplined Bid Triage & Assessment process.

Immigration tightening. The Home Office removed the right for most care workers to bring dependants in 2024 and strengthened compliance around sponsorship and exploitation prevention in 2025. For providers who relied on international recruitment to stabilise rotas, that creates new risk, cost, and lead-time in workforce planning. Document compliance rigorously and reflect this in your renewal and tender narratives—our Tender Review & Proofreading service can pressure-test those claims against scoring guides.

VAT and corporate structures. HMRC signalled tougher action against avoidance involving VAT groups and arrangements designed to minimise VAT on staff supply. Revenue & Customs Brief 2 (2025) confirms the direction of travel: where structures are primarily designed to obtain a VAT advantage, HMRC may challenge them under the VAT avoidance disclosure regime and related powers. Providers using “creative” structures around staffing, management or shared services should review now and ensure their pricing and renewal packs reflect a normalised position—see Contract Continuity & Outcomes Evidence for MAT-aligned assurance.

Commissioning reality. Despite inflation, commissioners remain constrained. Under the Procurement Act 2023 (live from February 2025), awards and renewals lean harder into Most Advantageous Tender (MAT)—meaning clarity, outcomes, governance and defensibility. In short: you need to prove value, not just state it. If your positioning needs a reset, consider a focused Strategic Review & Positioning.

2) Pricing Under Pressure: How to Avoid the “Race to the Bottom”

With rising wage floors and on-costs, “holding price” by absorbing costs is rarely sustainable. Instead, consider a four-part pricing strategy that commissioners can accept as reasonable and defensible:

  1. Transparent cost build-up (pay bands, on-costs, travel/sleep-in logic, supervision & governance). Where possible, align the narrative to the local commissioning model (e.g., time-and-task vs. outcomes-based, block vs. call-off).
  2. Productivity and reliability gains you commit to (e-rostering, travel optimisation, vacancy reduction plan, rapid backfill; measurable KPIs). Evidence the system behind this in your bid library.
  3. Outcome-linked value case (reablement gains, ED/LOS avoidance, fewer failed visits, improved continuity; tie each to measurable impact). Feed these into quarterly renewal packs via contract evidence reporting.
  4. Risk-share options for phased starts or phased rates (e.g., lower rate in month 1 while building the team, then standard rate once KPIs are demonstrably stable).

Commissioners do not reward opacity. A structured cost narrative plus a credible improvement model is far more “MAT-friendly” than a low headline rate with obvious fragility underneath. Have a live tender? Run a quick evaluator-style review to ensure scoreability.

3) Workforce: From Cost Centre to Competitive Advantage

Stabilise turnover to protect margin. Each unplanned vacancy triggers recruitment fees, overtime, agency and quality risk. Build a “turnover reduction bundle” you can pitch in tenders and demonstrate in reviews:

  • Predictable hours + minimum contract offers (where viable), reducing stop-start income that fuels churn.
  • Faster induction to autonomy with structured “capability ladders” and buddying—cutting time-to-productivity.
  • Retention micro-incentives tied to continuity (e.g., quarterly attendance & continuity recognition rather than blunt sign-on bonuses).
  • Clinical/PBS supervision embedded—improves risk handling, reduces incidents and give staff a reason to stay.

Overseas recruitment, carefully. If you sponsor workers, ensure bullet-proof compliance: CQC-registered entity sponsoring (where required), genuine vacancies, fair pay, and safe conditions. Document everything. Build a rota resilience model that doesn’t depend on one recruitment channel. We can help articulate this credibly in domiciliary, home care and complex care bids.

Grow skills that lower cost-to-serve. In complex/PBS pathways, targeted capability (e.g., dysphagia, epilepsy rescue meds, positive behaviour support) can reduce avoidable escalation, which improves both outcomes and cost position. Use internal CPD logs and observed practice to evidence competence—then showcase reductions in incidents, complaints and avoidable hours (see our complex care guidance).

4) VAT, Structures & Shared Services: Stay on the Right Side of HMRC

Many providers use groups, cost-sharing, or management-service models. The principle in 2025 is simple: if the main effect is VAT advantage on staff supply, expect scrutiny. HMRC’s 2025 brief flags counter-avoidance tools and challenges to structures whose primary purpose is tax advantage. Conduct a “substance over form” audit with your advisers:

  • Map intercompany flows (people, management, premises, systems) and the commercial rationale for each charge.
  • Stress-test against the HMRC brief and guidance—could this look like staff supply in disguise?
  • Model the worst-case cash impact of HMRC challenge; if painful, plan the exit now, not post-enquiry.
  • Update tender narratives to confirm VAT compliance and audit trail—reassurance scores under MAT (we cover this in renewal packs).

Pragmatically, if you’ve relied on historic “novation” or similar arrangements to trim VAT exposure, build a glidepath away from them and reflect the normalized VAT position in medium-term pricing.

5) Doing More With the Same Budget: Precision Productivity

Productivity in care isn’t about rushing—it’s about fewer wasted miles, fewer failed visits, fewer duplications, and better first-time resolution. Five levers that usually pay back quickly:

  1. Travel optimisation and patching. Re-draw patches quarterly using real drive-time data; set a KPI for “travel % of paid time” and trend it.
  2. Continuity scheduling. Continuity reduces re-work and issues. Track “% visits by known worker” and link to complaints and outcomes.
  3. Smart escalation playbooks. Clear SBAR/handover prompts reduce re-contacts and inappropriate escalations (especially in IUC/UCR/UTC interfaces). See our NHS IUC/OOH page for examples.
  4. Right-sized documentation. Reduce duplication: master care plan + linked prompts for risk/safeguarding/meds checks. Less admin, fewer errors.
  5. Data hygiene sprints. Monthly 60-minute sprint to fix missing fields in e-rostering/EPR; better data = better planning and stronger KPI evidence.

6) Tendering in a High-Cost Era: How to Score Under MAT

Mirror the scoring guide. Build answers that track exactly to the marking domains: access, safety, workforce, integration, outcomes, value. Use signposted sub-headings and a compliance cross-walk (Question → Spec clause → Where covered). Our evaluator-style proofreading mirrors this approach.

Evidence over assertion. Replace “we are excellent at continuity” with: “Continuity averaged 84% in Q2 across 600 visits; complaints dropped 32%; we commit to 80%+ within 12 weeks of go-live with monthly reporting.” If you need reusable, CQC-ready content, consider our sector pages: LD, Domiciliary, Home Care, Complex Care.

Own the cost story. Explain wage/NI/NLW and on-costs, but offset with levers (travel optimisation, lower churn, rapid backfill, rapid competence). Commissioners will pay a fair rate for a defensible plan that protects outcomes.

Integrate health interfaces. If you touch UCR/111/CAS/UTC or GP enhanced access, show the handshakes and feedback loops—this is where many bids fall down. If you don’t operate those services, show how you will coordinate with them safely (see NHS IUC/OOH & Primary Care).

Be VAT-safe. A single line confirming you operate VAT and corporate structures in line with HMRC guidance (with periodic external review) is reassuring.

7) Renewal Confidence: Turn Delivery Into “Evidence Packs”

Under the Procurement Act’s transparency and MAT principles, the providers who keep work long-term are those who can prove performance. Build a quarterly “commissioner pack” that includes:

  • KPI dashboard + data quality notes (access, continuity, re-contacts, incidents/1,000 hours, compliments/complaints).
  • Governance & learning (supervision cadence, RCA themes, action logs, audit calendar).
  • Social value with proof (jobs, skills, inclusion, ESG; tie to local priorities).
  • Two concise case studies linking inputs → activities → outcomes → evidence.

That single discipline improves day-to-day operations and makes tendering easier—because you’re never starting from a blank page. We build this with you through Contract Continuity & Outcomes Evidence.

8) Board Checklist: 30/60/90 Days

Days 1–30 (Stabilise)

  • Confirm pay spine and on-cost assumptions for 2025/26 (NLW, pension, allowances); document the rationale for commissioners.
  • Run a quick VAT/structure risk screen with advisers (map flows; identify any staff-supply exposure).
  • Freeze non-essential template sprawl; begin building a single bid library with version control.

Days 31–60 (Productivity & Proof)

Days 61–90 (MAT-Ready Growth)

  • Refresh method statements and governance annexes; align to scoring domains.
  • Confirm immigration/sponsorship compliance; diversify recruitment channels where needed.
  • Run a red-team on your highest-value upcoming tender using evaluator-style review.

9) What “Good” Looks Like in 2025

Providers that continue to win (and keep) contracts are doing three things consistently:

  1. They’re honest about costs—and pair that honesty with hard-edged productivity levers.
  2. They industrialise evidence—quarterly packs, clean KPIs, believable case studies.
  3. They design for MAT—answers that are easy to score, safe to defend, and clearly integrated with system partners.

This isn’t about “spinning” a better story. It’s about running a tighter operation and letting the evidence do the talking.

Where We Can Help (practical, fast, scorable)

Sources & further reading

  • Skills for Care – State of the adult social care sector and workforce in England 2024.
  • HMRC – Revenue & Customs Brief 2 (2025): VAT avoidance by VAT groups.
  • Guardian/FT coverage – dependants ban and immigration tightening for social care visas in 2024–2025.
  • NLW uplifts for 2025 reported widely (e.g., Guardian).

Looking Ahead to 2026: What Might Change — and How to Prepare

Forecasts come with caveats, but providers can still plan smartly. Below is a pragmatic view of what 2026 may look like for health and social care procurement and delivery — and the actions worth taking now.

🔄 Procurement & Market Dynamics

  • Frameworks bed in: Expect more call-offs from existing frameworks and fewer open mini-competitions where performance is strong and evidenced. Keep your renewal story current with evidence packs.
  • MAT culture matures: “Most Advantageous Tender” scoring continues to reward auditable outcomes, stable workforces, and social value delivery over lowest unit cost. Use bid triage to focus where you’re strongest.
  • Transparency as default: Published performance and change notices normalise; weak evidence becomes harder to hide.
  • Locality variation: Some areas lean into longer contract terms for continuity; others keep shorter cycles with heavier KPI scrutiny.

👥 Workforce & Capacity

  • Tight labour market persists: Recruitment/retention pressures continue; providers with credible development, supervision and continuity plans remain more competitive.
  • Skills over headcount: Evidence of competence (observed practice, accredited modules, clinical oversight) weighs heavily in renewal and award decisions—particularly in complex care.
  • Smarter rostering: Efficiency gains increasingly come from rota optimisation, reduction of travel dead-time, and better case-mix planning.

💷 Cost Pressures & Efficiency

  • Unit-cost discipline: Commissioners expect visible links between pay uplifts, productivity measures and quality/safety outcomes.
  • Evidence-backed value: “Cheaper” without risk controls is less persuasive; “best value” with quantified outcomes and savings pathways is.
  • Digital basics first: Simple improvements (clean data, automated KPIs, incident-to-learning loops) often beat big platform promises. Bake these into your bid library and templates.

🏥 Integration & Assurance

  • ICB interfaces deepen: Community pathways, discharge, UCR and primary care links continue tightening; bids that show real handovers and data flows score higher (see NHS IUC/OOH).
  • Governance proof: Expect closer attention to escalation, RCA, supervision evidence, and how learning cycles change practice.

🧭 What Likely Stays the Same

  • Quality > claims: Assertions without audit trails won’t land.
  • Local outcomes matter: Place-based priorities (equity, inclusion, prevention) remain central to scoring.
  • Page limits stay tight: Structure and signposting remain decisive for marks.

🛠 Actions to Take Now (to be 2026-ready)

  • Lock in an evidence cadence: Quarterly KPI dashboards + narrative assurance aligned to your contracts via evidence support.
  • Tune your bid library: Index to common scoring domains; embed commissioner feedback and update cycles with library & process design.
  • Run triage with discipline: Apply bid/no-bid tools to protect margins and focus on high-fit opportunities.
  • Bolster workforce evidence: Map competencies, supervision records and continuity plans to evaluation language—especially for home care and domiciliary.
  • Collect lived experience: Short, consented case studies with data points — refreshed each quarter.

📊 Leading Indicators to Watch (check quarterly)

  • Commissioner notices: Planning/contract change/performance notices in your target areas.
  • KPI trendlines: Time-to-start, continuity, incidents per 1,000 hours/contacts, complaints and compliments.
  • Workforce stability: Vacancies, agency reliance, supervision compliance, observed competence.
  • Social value delivery: Local jobs/skills, inclusion metrics, carbon/efficiency initiatives with proofs.

Bottom line for 2026: Providers who can show safe, consistent delivery with auditable outcomes will find commissioners more willing to extend, call off, and deepen partnerships. Invest in the evidence engine now — it pays back in awards, renewals and calmer delivery. If you want support pulling this together fast, book a Strategic Review or contact us to scope your priorities.

Written by Mike Harrison, Founder of Impact Guru Ltd — specialists in bid writing, strategy and developing specialist tools to support social care providers to prioritise workflow, win and retain more contracts.

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