Jump in care home insolvencies


Posted on April 25th, by geoff in Caring Times. Comments Off on Jump in care home insolvencies

The number of care home businesses falling into insolvency has jumped by 18%, with 47 care home operators in England and Wales becoming insolvent last year, up from 40 in the previous year, says accountancy firm Moore Stephens.

Research by the firm also shows that the number of care home businesses becoming insolvent has risen by 34% over three years, when there were 35 insolvencies in 2012/13.

Mike Finch, partner at Moore Stephens, said local authority spending on care homes continued to fall, with estimates suggesting that there would be a £2.9bn annual funding gap in social care by the end of the decade.

“The Government’s introduction of a mandatory national living wage from April 2016 is set to further increase pressure on the care homes sector as staff costs will rise,” said Mr Finch.

“Care homes have come under increasing financial strain and, with a sharp increase in their wage bill, many more risk being pushed to breaking point. With funding from local authorities contributing a substantial amount to the revenue of care homes there is understandable concern of the impact any further spending cuts would have on the sector. This is especially important as the cost of care in the UK remains high.”

Mr Finch said that, while legislation giving local authorities powers to increase council tax by 2% to help fund social care was a step in the right direction, there was real concern that this would not meet the spike in demand caused by the UK’s aging population.

“The cost of dealing with regulations in the care sector has been rising with residential care homes spending roughly 16 man-days a year dealing with inspections and 25 man-days a year handling information requests,” he said.

“Many care homes have also lost control over their increasing property costs by selling ownership of the property they occupy to an investor and then renting the property back from the same investor with pre-agreed rent increases they can no longer afford.

“The inevitable upheaval caused by closing care homes would clearly be unwelcome to pensioners, especially if they are still residents in the facility. If care home closures continue at the current rate, then questions regarding the duty of care to any residents still in situ will doubtless arise.”





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