Nestor Healthcare is to scale down its NHS agency business, which has suffered yet another slump in revenue and profits.

Turnover for the year to December fell to £309m, from £389.8m in 2004.

“The well-publicised overspends in the NHS are having a significant impact on the demand for staff, both temporary and permanent,” said chairman John Rennocks.

“It's a situation exacerbated by an oversupply of certain professionals - for example, hospital junior doctors and physiotherapists.”

Certain NHS contracts are now so marginally profitable that consideration will be given as to whether they are worth continuing with, he said.

The firm will now focus more on primary care and social care.