A BBC Radio Four investigation has concluded that more than a quarter of care homes in the UK are so weighed down by debt that they are in danger of going out of business.
A report by the station’s You and Yours programme trawled accounts filed at Companies House and found that an average care home in the UK makes just £17,647 profit per year before tax.
The programme also calculated that, on average, individual care homes are borrowing around 61% of the value of their business. Across the industry, this adds up to £4 billion of debt.
Business risk adviser Nick Hood, from Opus Business Services, told the BC that business owners would find it difficult to raise capital to invest given the level of debt as well as other headwinds facing the industry.
“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.” He said.
John Strowbridge, managing director of Avery Health Care Group, told the programme that rising costs and frozen settlements for fees with local authorities are making it difficult to survive on the income from taxpayer-funded residents.
“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, not just Northamptonshire, will continue to be reduced in everybody’s care homes, because you just cannot afford to take local authority clients anymore,” he said.