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Rise in care homes going out of business

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Residential care home insolvencies have risen by three quarters over the last year, according to new figures by accountants Moore Stephens.

A total of 148 care homes entered insolvency in 2017/18 compared with 81 in 2016/17.

The sector has been struggling since the Government cut local authority funding during its austerity drive, says Moore Stephens partner, Lee Causer.
Times have been made harder still as a number of high profile, complex care-home insolvencies have caused mainstream lenders to be more cautious of providing low cost funding to the sector.

The cost of providing a high standard of care and in particular the rise in the National Living Wage, has also increased markedly in recent years.
The average residential home now spends 52 per cent of its turnover on staff. Demand is also rising for qualified staff, in particular nurses, that care homes require. This has led to care homes increasingly hiring their healthcare professionals as expensive agency workers.

A rise in interest rates expected this year will create further costs for care homes, who will see any floating rate debts secured against their properties increase.

Mr Causer adds: “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.

“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.”

Cllr Izzi Seccombe, Chairman of the Local Government Association’s Community Wellbeing Board, says:  “The funding gap facing adult social care is set to exceed £2 billion by 2020 and this simply addresses the impact of inflation, the National Living Wage and demographic change.  It does not address other key pressures such as unmet need, improved training, and pay and conditions for the social care workforce, including sleep-in costs.

“Councils can only do so much against a backdrop of chronic underfunding of adult social care.”

Social care leaders including Nadra Ahmed, Executive Chairman, National Care Association, Andrea Sutcliffe Chief Inspector of Adult Social Care, CQC, and former Health Secretary Stephen Dorrell, will discuss the challenges facing care homes and offer solutions at the Health+Care Show, 27-28 June Excel, London.

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