Seventy-five companies failed in 2016 as councils cut contributions and wage increases raised cost of frontline staff
A record number of care home businesses failed last year as the financial pressure on social care in Britain took its toll. New government figures show that 75 care home businesses were declared insolvent in 2016, up from 74 the previous year.
The failures mean that in total 421 care home businesses have collapsed since 2010. The figures cover nursing homes, homes for the elderly, residential care activities for learning disabilities, mental health, and substance abuse. FRP Advisory, the consultancy firm, said that care homes were the only industry in the UK to have suffered from rising insolvencies over the last seven years.
Care homes are under pressure because local authorities have cut contributions for residents, while costs – particularly staff overheads – have been rising. Philip Hammond, the chancellor, announced in the March budget that an extra £2bn of funding would be granted to social care in England over the next three years.
“My view is that if you ask me who is to blame, it is the government,” he said. “The government should be delivering a very clear vision for what social care is, they should be giving clear expectations to citizens about what they should expect from the system and what they should expect to pay for. None of that is happening.”
Chris Stevens, partner at FRP, warned that insolvencies in the sector were likely to remain high this year. He said: “The fall in sterling against the euro will exacerbate pre-existing pressure on staffing costs in a sector reliant on overseas workers to fill frontline staff vacancies, and where margins have come under increasing pressure from the rise in the minimum wage, pension costs and cuts in local authority funding.
“The care home sector is beleaguered due to all local authorities facing overall double-digit budget cuts for this current financial year under way and beyond.”
The care home sector will be in the spotlight again later this month when the competition watchdog delivers its interim report. The Competition and Markets Authority is studying how the market works and whether there are grounds for consumer enforcement action.
The regulator has the power to make recommendations to the government and the industry about necessary changes and can also threaten businesses with legal action if they are deemed to have breached consumer laws or engaged in unfair commercial practices.
The watchdog has already received complaints about care homes continuing to charge families for weeks after the death of a relative. The families are being charged for sums that can amount to thousands of pounds to cover for the time it can take for a room to be relet.