28% of care homes at risk of failure because of government underfunding

28% of care homes at risk of failure because of government underfunding

November 28, 2016

We have today published a detailed report into the parlous financial state of the UK care home market.  Our findings are based on research carried out using the database and methodology of the financial health monitoring specialists, Company Watch.

In essence, 28% of care home operators (1,718 in all) are so financially vulnerable that they face the risk of insolvency.  This means that approximately 6,000 of the UK’s 21,000 care homes might be forced to close unless they can be rescued. In addition, 12% of operators are ‘zombie’ companies with higher debts than the value of their assets.

Our Business Risk Advisor, Nick Hood comments:

“Every part of the UK adult care system is in crisis. Private sector operators are withdrawing from contracts for domiciliary care services. The NHS is facing an unprecedented bed blocking issue because there is insufficient domiciliary and residential care capacity to deal with patients leaving hospital.

“Care home operators are refusing to accept local authority funded residents because the fees are well below the cost of providing care. Sooner or later, privately-funded residents and their relatives will revolt against having to pay sky high fees to cross-subsidise publically funded residents. 

“The residential care sector, which looks after the most vulnerable in society, was barely profitable, even before the impact of the National Living Wage. Our research shows that far too many operators face a serious risk of failure and a deeply worrying number are in negative financial equity. Debt levels for those who borrow are far too high.

“In the Autumn Statement, the Government missed its chance to tackle the residential care crisis and restore the £2bn funding it took away to help plug its deficit. Right now, the UK is sleep walking into a full blown residential care crisis.”