Out-Law News 1 min. read

'Record' insolvencies among residential care home businesses last year


A record number of residential care home providers went out of business last year, driven by increasing cost pressures and local authority budget cuts, according to new figures.

Business analysts FRP Advisory said that care was the only sector in which insolvencies had risen over the past seven years, with more expected over the coming year, according to a report in the Guardian.

"The fall in sterling against the euro will exacerbate pre-existing pressure on staffing costs in a sector reliant on overseas workers to fill frontline staff vacancies, and where margins have come under increasing pressure from the rise in the minimum wage, pension costs and cuts in local authority funding," Chris Stevens, a partner at FRP Advisory, told the publication.

"The care home sector is beleaguered due to all local authorities facing overall double digit budget cuts for this current financial year underway and beyond ... meaning operators have limited abilities to increase their fees which currently for many are running below the true cost to the businesses of delivering appropriate care - all placing rising financial pressure on care sector operators," he said.

The figures, which cover nursing homes and homes for the elderly, residential care activities for learning disabilities, mental health and substance abuse, show 75 insolvencies in the sector in 2016; up from 74 the previous year. In total, 421 such businesses have failed since 2010, according to FRP Advisory.

An extra £2 billion for social care over the next three years announced by the government as part of the 2017 Spring Budget was described as a "sticking plaster" by healthcare expert Joanne Ellis of Pinsent Masons, the law firm behind Out-Law.com. Commenting on the announcement, Ellis said that the longer term challenges raised by the UK's ageing population needed to be addressed urgently by the government.

The chancellor also pledged to publish a 'green paper' setting out strategic options for the long-term funding and reform of social care in England later this year. However, the timing and publication of this paper will now depend on the outcome of next month's unexpected general election.

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