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Figures for 160 practices in the south-east of England for Ramsay Brown and Partners show that profits fell to £117,120 in the first year of the pay freeze.

Specialist medical accountants forecast a similar 7 per cent fall in profits for 2007/8.

Figures for 100 practices at Surrey-based medical accountants PKF show a 6 per cent drop to £134,049.

These figures come as GPs face sharp criticism from the release of final, official 2005/6 figures which show profit increases of 10 per cent (see page 9).

This week the DoH argued for the third successive pay freeze, the NHS Employers for increases of no more than 2 per cent and the BMA for up to 4.3 per cent in evidence to the Review Body.

Laurence Slavin, a partner with Ramsay Brown, said practices had endured profits drops of up to 29 per cent in 2006/7. This exceeds the worst predictions of a squeeze of 25 per cent (GP, 30 March).

Earnings are likely to fall a further 7 per cent in 2007/8, the second year of the pay freeze, with expenses already pared to the bone, Mr Slavin said.

The only way that practices can now boost profits is by increasing list sizes, he said.

'It would be disastrous if the MPIG went. Partners would lose £20-£30,000 each.'

Ramsay Brown's £117,120 profits headline figure for 2006/7 disguises huge discrepancies, with profits per partner falling as low as £85,807.

In 48 per cent of practices, NHS profits per partner fell below the media-hyped £110,000 threshold. They exceeded £250,000 per partner in only four practices.

PMS GPs have taken a battering, Mr Slavin said. But growth money has kept more than twice as many PMS practices in Ramsay Brown's top quartile for the year than in their bottom quartile.

Practices have heeded warnings to rein in expenses to maintain profitability.

Mr Slavin explained income in 2006/7 had fallen by 2 per cent, the further loss in profits was from the increase in expenses.

Asked how practices should minimise profit falls in 2007/8, Mr Slavin said: 'Maximise list size and minimise list losses, keep a tight control on expenses and look to see if the tax payments on account can be reduced.'

These first figures are for the south-east of England, an area where GP profits are among the highest in the UK.

It is unlikely that profits will be as high in other parts of the UK, bringing average earnings down.

prisca.middlemiss@haymarket.com

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