Residential Care

Residential Care

The residential care sector was seriously disrupted by the pandemic and with very tragic consequences for residents, staff and families. During this time Occupancy levels, which is a critical factor for care home operators, dropped by 8% in the first year of the pandemic. Despite the the Government’s financial support through this period, this only saw to delay already fundamental issues in funding throughout this sector.

Our recent report on the residential care sector for England, Scotland and Wales is available in the link below.

Financial stability

There are some deep flaws in the business models of most residential care operators and the impact of the Pandemic, the Ukraine war and consequential input cost pressures have made the overall financial health profile of the sector surprisingly solid, although not without issues that give good cause for concern.

The average financial health rating allocated by the business health monitoring specialists, Company Watch, is 49 out of a maximum of 100. This is slightly down from a year ago, but broadly in line with the UK economy as a whole.

More worrying is that 28% of residential care companies are in the Company Watch warning area with scores of 25 or less, indicating a one in four risk of filing for insolvency within three years. Equally, 20% are ‘zombie’ companies with negative balance sheets and 23% have negative working capital.

Formal insolvencies of care home operators have been relatively rare in recent years at well under 100 per annum, mainly because of the desire by stakeholders to avoid closures and damaging disruption to residents. Never the less, they have been rising in 2023.

Business challenges faced by the Residential Care sector

• Maintaining overall occupancy rates at profitable levels
• Maintaining a profitable mix between self-payers and publicly-funded residents
• Generating cash returns to fund investment in maintaining adequate quality standards
• Dealing with rising demand for care home places. The total number of care home beds per capita for older people has actually fallen by 17% since 2012
• Generating sufficient profits to raise staff pay to improve recruitment and retention. Staff vacancies were 11% in January 2022
• Significant rise in mortgage and other lending rates for residential care homes as many operators can only secure variable rate borrowing
• Generating enough cash flow and profits to service rising charges and repayments on borrowings
• Increasing fees to cover rapidly rising input costs, especially for energy and other direct expenses
• Obtaining insurance cover, either at all or at an affordable level of premiums.

Helping businesses in the Residential Care sector

Partners and employees across the Group at Opus have extensive experience and knowledge of the Care Home sector.

Ways in which we support companies, business owners and their management include:

• Carrying out comprehensive business reviews to assess and advise on a broad range of financial and commercial issues
• Assisting with financial forecasting
• Reviewing financial and operational systems
• Advising and supporting in negotiations with key stakeholders, such as lenders, suppliers and landlords
• Raising new funding, either as equity or borrowing facilities
• Providing strategic advice on changes to the business model or on managing growth
• Seeking out acquisition and merger opportunities
• Advising on exit routes such as the sale of the all or part of the business
• Undertaking forensic investigations when necessary
• Planning and assisting with restructuring projects
• Offering independent advice on solvency issues.

If you would like to hear more about how we can help your business to best manage any current challenges, please contact us at  or call us at our nearest office to you.