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Financial expert and accountant Vinku Shah provides his view on the 2026-27 community pharmacy funding settlement…

The announcement of the community pharmacy contractual framework (CPCF) for 2026-27 has brought some breathing space through a £340 million funding uplift, taking total sector funding to £3.636 billion.

However, from a pharmacy specialist accountant’s perspective, the critical question is not the size of the uplift, but how much of it will actually translate into improved profitability once rising costs are fully accounted for.   

For many independent pharmacy contractors, the 2026-27 financial year will be characterised by a widening gap between income growth and cost inflation. So, what can we expect to see in pharmacy financials over the next 12 months?

At first glance a 10.3 per cent increase in funding appears significant with:

-             Increased Single Activity Fee from £1.46 to £1.52.

-             £200 million uplift on the retained medicines margin. 

-             Integration of Pharmacy First funding into the core CPCF contract.

-             £239 million historic margin over delivery written off.

While these measures enhance income stability and cash flow, much of the uplift is either non-recurring (eg, margin write-off) or linked to increased dispensing activity.

When stripped back to underlying recurring income, we estimate the real increase for the average pharmacy may be far more modest and potentially closer to incremental gains rather than transformational change.  

The net effect on 2026-27 financial statements

Revenue

We expect to see modest growth in NHS income driven by increased retained margin allowance and activity fees as well as growth in clinical service income from Pharmacy First expansion and independent prescribing.

Revenue growth will be ties to increased workload rather than improved margins.

Impact on gross profit

The gross profit may show a slight improvement due to the increased medicines margin allowance and the Single Activity Fee but the increase will not be sufficient to offset rising operational costs because the margin gains will be partially offset by purchase price volatility and dispensing profitability remains highly sensitive to reimburse       

Rising cost base: The dominant story

Wage inflation

Staffing cost is the biggest overhead for a pharmacy business and with minimum wage increased to £12.71 since April 2026, there is an indirect impact on the overall wage costs as supervisors and technicians then expect an annual wage increase, pharmacists’ salaries have been on an upward trajectory and overtime and locum rates are volatile.

With the funding contract aligned to higher dispensing activity, it is inevitable that the workforce will be further stretched for pharmacy contractors relying on their work force. 

Employer national insurance

In April 2025, the employer NI secondary threshold was reduced to £5,000 from £9,100 and that meant a lot more pharmacy businesses becoming liable to pay employers NI.

Pharmacy businesses are labour intensive and the uplift in funding does not directly compensate for this structural increase in NI, which is now embedded in the cost base of operating a pharmacy.

Business rates and overheads

The sector faces increased business rates as well as general overheads increases and these cost pressures will absorb any residual uplift after salary and NI increases are factored in.

EBITDA

This is a key metric from our perspective and the outlook remains challenging. Considering the above analysis, EBITDA is likely to compress or remain flat.

Net profits will decline for those pharmacy businesses with weak cost control or inefficiencies. The funding uplift is essentially seen as a stability measure rather than help pharmacy businesses move forward financially.

Strategic implications for pharmacy owners

From a finance perspective, 2026-27 reinforces the importance of proactive management.

Workforce optimisation

Pharmacies must carefully review staffing models and consider skill mix and role utilisation and reduce reliance on high-cost locums through efficient rota planning in advance.

Use of automation such as dispensing robots or hub-and-spoke where viable may free up valuable time for pharmacists to deliver service income that will push up profitability.

Service profitability

With clinical services expanding, there is opportunity for the pharmacy sector to reduce reliance on the core contract, but careful consideration needs to be given to the services offered as not all services are equally profitable.

Careful analysis of time, staffing, and reimbursement is essential to ensure the business delivers high margin services.

Cost control and review

Detailed management accounts are now essential for pharmacy business owners to track payroll costs as a percentage of turnover and increases relative to increase in turnover to measure staff efficiency.

Pharmacy business owners must also review overhead trends to identify where there may be cost leakage and potential to source alternative service and utility providers which may be more cost efficient.

Stabilisation, not transformation

The CPCF 2026-27 settlement represents a positive step in recognising the financial pressures facing community pharmacy.

However, from an accountant’s perspective, the core narrative remains unchanged: rising costs – particularly wages, employer National Insurance, and overhead inflation – will absorb most of the additional funding.

The result is a financial year where many pharmacies will maintain activity, expand services, and generate stable cash flow, but see limited improvement in profitability.

For independent contractors, the challenge is clear: financial resilience will depend less on the contract itself and more on operational efficiency, cost control, and strategic service delivery. The funding uplift has bought time but long-term sustainability is yet to be delivered for community pharmacy.

Vinku Shah is a partner at Xeinadin.