The New GP Contract: Navigating the Cashflow Challenge

The 2026/27 GP contract brings changes that, while presented as progress, carry significant financial risk for practices and Primary Care Networks (PCNs). The shift in funding streams means many could face serious cashflow pressures in the year ahead and those without a clear picture of their finances may find themselves in a difficult position.

The Cashflow Challenge

While practices receive a monthly payment from their core NHS contract, the flow of funding from PCNs is far from straightforward – some networks pass all funding down to practices, while others use it to cover deficits or retain it for future use. Some networks do not pay any surpluses until sometime after the year end, with the result that working capital flowing from PCNs to practices is inconsistent. This timing mismatch can leave practices bridging gaps of several months, drawing on reserves or overdraft facilities that add cost and stress – particularly for smaller or single-handed practices with limited financial buffers. It is therefore essential that practices have a thorough understanding of their overall income streams and how they fluctuate throughout the year.

The Funding Gap

The 2026/27 GP contract is likely to leave many practices financially worse off. The government has assumed a 2.5% wage increase for GPs and practice staff, but with expenses rising at 8–10% each year, that assumption falls well short of reality. These pressures stem from a combination of employer NI contribution increases, minimum wage uplifts, and persistent inflation across premises, utilities, and clinical supplies – costs that show no sign of easing in 2026/27. The projected 3.6% growth in GP funding does little to protect practice finances against this backdrop. Practices need to understand precisely where they stand – not at year end, but now.

If we consider a practice with 10,000 weighted patients, and temporary residents funding of £5,000 per annum, under the funding model in 2025/26, their annual General Medical Services (GMS) funding would have been £1,179,576. In 2026/27, the same practice will receive contract income of £1,244,332, an increase of £64,756.

However, if that same practice has an overall payroll cost of £1,000,000, then a pay rise of just 4% will increase costs by £40,000, and once other cost base increases are taken into account, and with the lack of inflationary increases in any funding streams, then the main contract increase is likely to be eroded. For a practice already operating on tight margins, this scenario is not theoretical – it is the likely reality for many, and the arithmetic becomes even more challenging when locum cover, sickness absence, or unexpected infrastructure costs are factored in.

Note that many other key items of income, such as Quality and Outcomes Framework (QOF), enhanced services, and PCN participation, have again received effectively no increase in funding level.

Planning Ahead

The practices best placed to weather these changes will be those that treat financial oversight as an ongoing discipline rather than an annual exercise. Maintaining up-to-date management accounts, forecasting cashflow across the year, and holding regular financial reviews enables partners to make informed decisions and respond quickly when funding assumptions shift. Practices that have not yet benchmarked their cost base against realistic 2026/27 projections should do so as a priority. Understanding where the pinch points will occur – and when – gives partners time to act rather than simply react. With neighbourhood health structures beginning to develop and contract terms continuing to evolve, having accurate, timely financial information is no longer a nice-tohave – it is fundamental to the sustainability of the practice.

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