Care home insolvencies rise by one third in three years

The number of care home providers becoming insolvent in England and Wales has risen by 34 per cent in three years and 18 per cent in the last year ending September 2015.

Some 47 care home providers in England and Wales (one sixth) became insolvent in 2014-2015, up from 40 the year before and 35 the year before that, according to research by accountancy firm Moore Stephens.

Local authority spending on care homes continues to fall, with estimates suggesting that there will be a £2.9bn annual funding gap in social care by the end of the decade, according to the Local Government Association.

The news comes following the Government’s introduction of the national living wage on 1 April, which is set to increase pressure on care homes as their staff costs rise.

Mike Finch, a partner at Moore Stephens, whose clients include care home owners, said: “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."

Referring to Government figures, Mike Finch added: “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.

“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.”

With the UK’s aging population on the rise, Mr Finch says: “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.”