06 May 2016
Radio 4's 'You & Yours' programme this week gave a very succinct assessment of how many businesses in the UK care home sector are in financial turmoil and meltdown.. with many homes facing closure over the next three years.
This is due to care homes being hit by local authority budget cuts - imposed on them by central government - resulting in then running at a loss, unable to meet debt commitments. This has been compounded by the introduction of a new living wage for workers and increased regulatory pressure to improve overall standards.
Research suggests that as a consequence, the average UK care home reliant on public sector funding is barely profitable… and that the only way many are surviving into profitability in a sector facing huge demands as an elderly population increases ten fold year on year… is to access other forms of investment.
Foreign investors (currently predominantly from the US) are looking favourably at this very lucrative market as UK banks continue to tread cautiously through the domestic investment field following the financial crisis.
A study by OPUS BUSINESS SERVICES for the BBC has found that more than 5,000 care homes are at risk of closure because they carry too much debt and don’t make enough profit to cover loan repayments. Each care home has borrowed on average 61% of the value of the business.
The Department of Health says that it recognises that the care providers are finding the current market ‘challenging’ … and that it is doing its best to protect vulnerable residents to ensure they are not left without care if a home closes.
The UK government has yet to realise that the only way the care home sector will prosper will be through encouraging private , individual and corporate, investment.
With the sector facing across the board insolvency, shrewd UK and overseas investors will no doubt seize opportunities within this globally struggling … but potentially massive investment portfolio.