British care homes facing collapse

A funding crisis is leaving thousands of care homes facing collapse, it has been reported.

According to research by leading accountancy firm Moore Stephens, 16% of care home companies in the UK are showing warning signs that they could be at risk of failure. The percentage has increased from 12% in previous research.

The increase to the National Living Wage in April this year is thought to be one of the main causes. Its rise to £7.50 an hour has put an increased burden on care home running costs. It is scheduled to rise again to £9 an hour by 2020.

Brexit was also another factor, with some homes finding it harder to recruit carers from other European countries.

There are 11,000 residential care homes in Britain which look after 420,000 people over the age of 65. In the country’s 4,700 nursing homes, there are 220,000 patients.

In their report, Moore Stephens looked at 7,497 care home companies and discovered that one in six were in financial distress. Staff costs had risen on average by a record 55% of turnover.

Lee Causer, restructuring partner at Moore Stephens, said: “Too many businesses in the care home sector are heading back to the brink.

“The mixture of rising costs, cuts in funding and an aging population has created a volatile situation, with many companies now showing signs of significant financial stress.

“Due to the aging population, extra staff are needed at care homes in order to keep up with the demand, but many care homes just don’t have the budget for extra staff.

“This has made it increasingly difficult for care home companies to offer a high standard of care- whilst remaining solvent.

“Concerns have also been raised that private care home providers unable to make a profit will hand back contracts to local authorities.

“It’s critical that care home companies receive the funding they require in order to offer the highest standard of care possible.”

Earlier this year, care home specialist Caresolve warned that care homes are facing a “fight for survival” following the introduction of the National Living Wage

The company carried out analysis showing the likely impact on an average operator’s profits based on the phasing in of increases in the NLW during the period 2016-21.

Caresolve’s findings showed that an increase in weekly fees of 2% per annum will result in profits plummeting to 70% of current levels by 2021. Even an increase of 3% will be insufficient to maintain profits at the current level beyond 2019.

Richard Shore, Caresolve’s Finance Director who heads up Caresolve Financial, said: “Our analysis revealed the potentially devastating impact the National Living Wage will have on care homes across the UK.

“The sector is already under immense pressures, but the NLW is probably the single biggest issue keeping both large and small care home operators awake at night. Many care homes are literally facing a fight for survival.

“Unless they take urgent steps, there is no question we will be hearing about hundreds, perhaps thousands of homes, closing due to the financial stresses caused by the NLW.”


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