Care home insolvencies soar by 83% in 2017/18

Care home insolvencies almost doubled in 2017/18, according to accountancy firm Moore Stephens.

Almost 150 services (148) went out of business in the year, compared with 81 in 2016/17.

Lee Causer, Partner, said: “Care homes should be benefiting from the demographics of the UK – an ageing population. But they are not. Care homes are not receiving enough local Government funding to sustain the profit margins necessary to run a successful business.

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“Many companies are finding it difficult to cope with the rising costs associated with the care industry. Without additional income, care homes will not be able to offer the levels of care required whilst remaining solvent.”

Moore Stephens attributed the rise in insolvencies to the cuts in local authority budgets and rising costs, including the National Living Wage, as well as a dependency on agency staff.

The accountancy firm said staff costs accounted for more than half of average care home turnover.

Mike Padgham, chair of the Independent Care Group, said: “These figures come as no surprise, we have been warning for years that the £6bn cut from social care would eventually see more and more care homes closing – and here we have the evidence.

“However, the statistics only tell half the story. For every home closure there are older and vulnerable people either forced to find somewhere else to live or unable to have a place because the number of homes is on the decline.

“Some 1.2m people in this country are now going without the care they need –  this is our mothers, our fathers, aunts and uncles – and unless action is taken this will very soon be us.

“We now face a further £2.3bn funding shortfall and that is going to mean more and more people not getting the care they need.

“The Government has to act on the crisis in social care – even if it means we have to better fund care through taxation. Otherwise, we are going to see more and more statistics like those issued today.

“It is shortsighted not to support social care. A hospital bed costs far more than a care bed – so investment in social care saves the NHS money.”

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2 Comments

  1. robert delaney said:

    I would suggest that these insolvencies are the tip of an iceberg. Without a major overhaul of care funding we shall see a continued decline in care standards as operators struggle to meet hugely increased needs. In many areas wage costs are now 60/70% of fee income at which point homes are unviable. Agency rates with 100% loading are crippling the sector. It is not unusual to pay £350/400 per night for an agency RGN . More than 50% of a (good) LA weekly fee.
    Hourly care rates paid by many Local Authorities are often no more than £4.00 per hour for Nursing care and often less than £3.00 per hour for Residential care. Annual increases in NLW and associated differential increases almost always absorb any increase in fees received from Local Authorities.
    Central Government has ignored this situation for the last two decades and has relied at all times on subsidies from self-funders . On one hand happy to do so and on other occasions happy to condemn when it suits them.

  2. Stephen Stone said:

    Little makes any sense except that LAs and government are taking a ‘divide & rule’ opportunity to hand their financially problematic social care duties over to unsuspecting smaller care home owners, by using a cycle of care home bankruptcy/liquidation, followed by fresh investment folly from over-optimistic new owners. Why is it that the big four banks or big four accountants (for example) set their own industry-wide fees structure and that is not a cartel, yet if four small care home owners in a locality jointly decide to agree minimum fees it is a cartel? Can some lawyer explain that in simple terms?

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