BBC’s ‘You and Yours’ warns of care home closures
A report commissioned by BBC Radio 4’s ‘You and Yours’ programme suggests more than a quarter of care homes in the UK are in danger of going out of business within three years.
The report, compiled by business risk analysts Opus Business Services, said about 5,000 homes were at risk of closure because they carried too much debt and did not make enough profit to cover loan repayments
Opus business risk adviser Nick Hood said that, on average, care homes made £17,647 in profit before tax and that individual care homes were borrowing about 61% of the value of the business on average – a figure that amounted to £4bn across the industry. He said there were 20,000 care homes in the UK, operated by 5,871 individual owners who made, on average, about £60,000 annual profit as operators.
“It leaves a very small pot to encourage people to stay in this market and run care homes and to invest in them and to create the extra capacity that we all know this market is going to need as the baby boomers get old and need to go into care,” said Mr Hood.
Much of the funding for care homes comes from private equity firms and US real estate companies, and You and Yours reporter Samantha Fenwick said there was concern these investors would want big and quick returns on their investments. But profitability would be further compromised, she said, by rising costs, including the new national living wage of £7.20 an hour.
John Strowbridge, managing director of Avery Health Care Group, which operates 47 care homes across England, said the new living wage was costing his company an additional £2m a year. He also said the fees provided to operators to care for local authority residents were often not enough to match care costs.
“If it continues, as it will do with the national living wage into next year and the year after, the number of local authority clients that care homes can admit across the country will continue to be reduced in everybody’s care homes, because you just cannot afford to take local authority clients anymore,” said Mr Strowbridge.
National Care Association chair Nadra Ahmed care homes were now in a very challenging market.
“What we’re finding is we are in that very difficult situation where responsible providers are going to think to themselves, ‘I can’t do this very well, I may as well come out of it’ and I think that’s the worry that we have,” said Mrs Ahmed.
The Department of Health said it recognised some care providers were “finding the current market challenging”. A spokeswoman said: “No-one will be left without care if a home closes.
“Following the failure of Southern Cross, we empowered the Care Quality Commission [independent regulator for England] to monitor the finances of the largest care providers and to provide early warning of likely insolvencies so we can better protect vulnerable people who use their services.”
Commercial property specialist Knight Frank’s head of healthcare Julian Evans told ‘You and Yours’ that many providers had a very aged property portfolio and were finding it difficult to afford the required maintenance. “This is a massive issue in the sector,” he said.
The Department of Health said it was working to make sure care providers had “strong contingency plans”.