Mental health accounts for more than 20% of the UK’s public health needs but receives less than 9% of NHS funding. That gap is now prompting changes in policy that will affect how mental health services are delivered.

The government has committed to shifting care from hospitals to community settings, with 24/7 neighbourhood mental health centres being piloted and mental health support teams being extended to an additional 900,000 children and young people by spring 2026. This means larger contracts, longer procurement cycles, and a buyer that is reducing the number of suppliers it works with rather than bringing in new ones.

Most mental health tech businesses are not set up for this. The majority still operate as managed therapy services, contracting clinicians and generating revenue per consultation. Growth requires adding headcount at a rate that closely tracks revenue. Gross margins are limited by clinical labour costs, and buyers typically view this as a cap on valuation.

Where the market is moving is toward businesses that combine clinical delivery with software that can be licensed: case management, booking infrastructure, EHR integration, and patient-facing tools used by other providers. This second revenue stream is not tied to clinician headcount, carries higher margins, and gives buyers something they can scale.

The rationale for consolidation is based on the patient journey. Referral tools, therapy delivery, and outcomes tracking each cover different stages. On their own, they are more exposed to pricing pressure. Combined, they are harder to replace and more attractive to NHS trusts and large employers looking to reduce the number of suppliers they use. Founders who can clearly separate software revenue from clinical services will find a wider buyer universe and a different conversation on valuation.

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