As Europe heads into a serious and long recession what are the prospects for investors in healthcare services?

The short answer is not very good - at least for asset heavy investments such as hospitals and care homes. The truth is that politicians, of whatever political persuasion, show little or no desire to introduce radical reforms in healthcare services. Yes, costs are running away. Yes, the private sector could save 15-20% in most areas.

But governments know that the mere fact that they are heading into recession means that they will be wildly unpopular anyway. So why guarantee you will be hanged, by meddling with public healthcare, when you might just get away with it if things start to get better in a few years time?  Privatising hospitals, axing nurse and doctor jobs are simply ways of guaranteeing that you will lose the next election.

Alienating 10-12% of the national workforce, when you can just go on pretending that the problem of rising healthcare doesnt really exist, (the standard response of the last 20 years) looks like a dumb option.

This means that we will not see mass privatisation of hospitals anywhere, and certainly not in the UK where the government still hasn't granted the Hinchingbroke hospital contract to Circle, even though a year has gone by since it won favoured status. The possible exceptions are Poland and Spain. I say possible, because both countries are in the midst of elections and the right wing politicians, who might take active steps, are wise enough to keep their mouths firmly shut on such a divisive issue.

What does this mean for the private healthcare sector?

It means that we are unlikely to see high profile reforms that will open it up to private competition. What we are likely to see is drops in tariffs (Portugal, Germany and Italy).  So the rising tide which floated so many boats 2005-2009 is ebbing fast.

The good news is that invisible privatisation is likely to continue apace. Labs, recruitment, imaging are all likely to be outsourced at a faster rate, as public hospitals seek to stretch their budgets further. This could also be very good news for homecare.

It is a brave private equity house which is prepared to make any investment in Europe at all at the moment.  The winners will be those who are prepared to take risks. Best placed are those who are willing to invest smallish amounts in a number of investments. It is all about finding good entrepreneurs and backing them. Venture capital has replaced private equity.