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Accountants warn of 10% fall in GP profits

Two-thirds of practices will see a drop in profits this year and falls of 10 per cent are possible, medical accountants are warning, writes Helen Crump.

GPs are being urged to

manage practice finance with extra caution as static income streams, higher outgoings and cost of living increases loom.

Accountants said GPs should consider cutting their drawings or face massive cash-flow problems down the line.

Bob Senior, vice-chair of the Association of Independent Specialist Medical Accountants and director of medical services at Southampton-based BKL Tenon, said as few as one-third of practices would maintain a profit this year.

He said it was fast becoming clear that the new range of enhanced services would not yield significant income while practices were already squeezed by frozen global sums, PMS baselines and a toughened quality framework.

'Some practices are likely to be quite hard hit,' he said.

Rosemary Smith, GP liaison manager at Sandison Easson in Wilmslow, Cheshire, said full-time partners working in an

average-size practice could each find themselves paying up to £20,000 more in tax in January 2007 than next month's tax

payment.

'My gut reaction is that it's going to be a 5 to 10 per cent reduction in profit,' she said. 'If they carry on drawing at the same level as last year, that could cause problems by the end of the year.'

Mike Gilbert, a partner with R-M-T accountants in Newcastle upon Tyne who compiles an annual survey of GP pay, said most practices' income would stagnate. He said they should consider new business opportunities such as talking over practices when singlehanders retire.

'Most practices that are reasonably well organised will stand still but less-than-average earners could be hit more than that,' he said. 'Their incomes could start going down again.

'They've got to organise themselves better. If they do, reduced profits could be avoided.'

Dr Philip Fielding, a GP in Cheltenham, Gloucestershire, said he was demoralised, particularly because there had not been a cost-of-living increase to the global sum.

'I would suggest that a 10 per cent fall is not an unrealistic possibility,' he said. 'It fills me with the feeling that our negotiators really didn't get control of this contract.'

Dr Laurence Buckman, deputy chief of GPC negotiators, said the prospect of profit falls was very real, if not as high as 10 per cent.

He said: 'It's not going to be as big as that but it will go down. Profit will fall slightly as expenses rise around 3-4 per cent.'

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