101 care homes declared insolvent in the last year
April 11, 2019
A hundred and one care homes were declared insolvent in 2018 as the sector continues to struggle with limited funding.
According to accountancy and business advisory firm BDO LLP, the sector has suffered from trading difficulties for almost a decade having entered the credit crunch with a substantial debt burden. Recent increases in interest rates have started to ratchet-up costs for the sector.
The care home sector has also suffered as a result of the reduced spending by central government with payments from local authorities remaining a major source of care home fees.
Research by the Association of Directors of Adult Social Services showss that local councils are planning social care budget cuts of £700m in 2018-19, despite the growing demand for services.
Reduced funding for the sector comes as staff costs continue to increase following the rise in National Minimum Wage from £7.50 to £7.83 in April 2018. This figure is set to increase again to £8.21 in 2019/20.
Some lenders are still reluctant to extend additional finance to the sector following a number of high profile and complex debt restructurings following the credit crunch.
BDO partner Lee Causer said restricted local government funding combined with high operational costs continued to be the biggest driver of care home insolvencies.
“Rising minimum wages and a decrease in care staff coming to the UK from Europe adds to the list of complications,” said Mr Causer.
“The Brexit uncertainty is compounding the issues with regard to the free movement of people and the potential availability of drugs.
“But it is not all bad news for the sector. Increased integration of the commissioning of care is starting to have a positive impact. Providers that innovate with flexible pricing models and are able to invest in technology and staff retention plans will continue to do well.
“In addition, the Care Quality Commission has equipped itself with specialist resource in the shape of the market oversight team. This means the CQC is able to more quickly engage with larger providers and analyse financial recovery plans in a way that would not have been possible historically.”