Scottish care home closures surge as deadlock over state funding continues

Scottish care home closures surge as deadlock over state funding continues

June 29, 2023

The appointment of Opus Restructuring & Insolvency as provisional liquidators to supervise the continuing trading and eventual winding down / closure of Hogganfield care home in Glasgow and Skye View in Airdrie in early June is just the latest bad news for the Scottish residential care sector, which had already been experiencing the largest number of closures for many years because of severe cost pressures.

The loss of funding for Scottish care homes

Until recently, Scotland’s care home operators had enjoyed fifteen years of certainty through the National Care Home Contract (NCHC) negotiated annually between Scottish Care, which represents independent operators, and COSLA, which acts as the representative of local government bodies in Scotland.

While this contract capped care home profits on state-funded residents at 4%, it provided Scottish operators with a stability their counterparts south of the border can only dream of. As long ago as 2017, a report by the Competition and Markets Authority (CMA) confirmed that English local authorities were paying fees which produced an average loss of £221 per week for every single state funded resident. This disparity has not reduced since then, as council budgets have been squeezed year after year. Operators in England can only survive by charging a huge premium to self-funders or refusing to take state-funded residents.

The NCHC arrangements are more important for the sector in Scotland than in England because some 70% of its residents are state-funded, unlike the figure of 49% for the UK as a whole established by the CMA report.

Increased pressures on Scottish care homes

The surge in costs for operators now seems to have de-stabilised the working of the NCHC, with COSLA only willing to offer a 6% rise in fees because of budgetary pressures, when many Scottish operators are seeing their energy and other care costs rise by many times that. There have been reports that some smaller independent operators have seen their bills rise by more like 500%.

Alongside, the accelerating costs there is a severe and worsening staff cost, retention and recruitment crisis. The Scottish government has pledged that care workers will be paid a minimum of £12 per hour and is committed to implementing and if necessary, enforcing this significant rise. That is not only unaffordable on the basis of the latest proposed NCHC fee offer, but is unlikely to enable homes to keep or to hire staff when the Scottish government’s Agenda for Change settlement will see NHS staff being paid 19% more than a worker in a similar role in a care home setting according to Scottish Care.

There has been a stand off now for over three weeks since a war of words broke out between Scottish Care and COSLA over the second and latest NCHC offer, which COSLA described as being at the limit of affordability. Scottish Care commented that there was a real urgency to save Scotland’s care homes. Clearly, this impasse must be resolved without delay as many more smaller care homes like those in Glasgow and Airdrie will disappear and capacity overall will become increasing stretched, with residents potentially needing to accept places far from their loving families and relatives.


If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.