28% of UK care homes at risk of bankruptcy, new report says

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UK publication Care Management Matters is reporting over 25% of all UK care home operators are at risk of failing or needing a financial rescue. That’s around 6,600 nursing homes that could close over the next three years.

The number of homes has already fallen from 18,000 to 2010 to 16,600 in July 2016 against an ageing population.

Its report found 1,718 out of 6,178 operators had finances that were in the Company Watch warning area.

Historically, struggling UK homes have not closed their doors as major creditors have been willing to write off debts and new operators have been found to take over their running.

But with the sector’s finances rapidly dwindling, smaller businesses are closing and major operators’ are only interested in bigger and more cost-efficient models.

Profits are also down for many operators since the Government introduced the National Living Wage (NLW) last April. Total profits earned by the sector were just £209M, compared to an estimated increase in annual staff costs from the effect of the NLW of over £400M.

Local governments fund aged care and they are demanding fee reductions, forcing many operators to raise the fees of privately funded residents to survive. Other operators simply refuse to take on more locally funded residents because they cost more money than they bring in.

This means average profits are far higher in areas with wealthier private residents – for example, £93,000 in the South East to just £19,000 in the North West, with Scotland the worst off.

Those profits sound good in Australia. Departing operators, no new entrants and more people at home longer – frail and often alone – is the evolving outcome.

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