OBJECTIVE: To compare the costs and quality of life of 77 patients who relapse with a control group of 68 non-relapse patients, in schizophrenia. METHODS: Patients were selected from current (active) psychiatric caseloads drawn from urban, suburban and rural Leicester and Leicestershire. Relapse cases were identified by the re-emergence and aggravation of symptoms, and by psychiatric in-patient re-admissions, current or within the last 6 months. Data collection included: social and demographic profiles, DSM IV classification, PANSS, CGI, GAF, Quality of Life (Lehman), EuroQol, and health care utilisation. Standard parametric/non-parametric tests are used to test for differences in outcomes and costs for relapse and non-relapsing patients. Hypothesis-driven analyses focus on the correlates of quality of life, links between symptoms and functioning, socio-economic consequences of schizophrenia, and cost consequences of positive symptoms and functioning deficits. Standard multivariate analysis will identify key determinants of costs, and Generalized Linear Models will be used to predict relapse status. Provisional results confirm higher costs and lower quality of life for patients who relapse. CONCLUSIONS: Schizophrenia is a long-term, debilitating and costly illness. Potentially high costs are incurred by health care providers, social services and other care agencies, and by families and sufferers themselves. One of the most costly aspects of schizophrenia is associated with illness relapse, which has been estimated, for example, to cost $2 billion in readmission costs in the US. There is currently no equivalent estimate for the UK. The findings from this study will be of interest to policymakers who face difficult economic choices concerning new but more expensive drug treatments for patients with schizophrenia. The challenge for new antipyschotic treatments is to improve efficacy and compliance and thereby reduce relapse rates. In turn this would be expected to bring about reductions in the total national costs of schizophrenia, whilst also improving the welfare of patients.