Cutbacks force care home closures

An increasing number of care providers are going out of business as a result of local council funding cuts, according to a new report.

Research carried out by accountancy firm Wilkins Kennedy reveals that the number of care homes going bust increased by 12% between 2011 and last year.

The total number of 67 homes in insolvency in 2012 is close to double the amount that went under in 2010 and came at a time when the total number of companies of all types going out of business dropped by 5%.

The report released by the accountancy firm finds that more homes are finding it difficult to manage their debts or keep their standards of care high due to local authority cuts aimed at managing the reductions in their budgets.

Wilkins Kennedy partner Stephen Grant confirmed that referrals from local councils were a huge source of income in a sector facing high fixed costs so the cutbacks are having a huge impact on care providers.

Care homes struggling with debts

Mr Grant said the boom years of good business encouraged many care homes to borrow and they are still dealing with those debts in more difficult times with low occupancy. He said many have already gone under and others are in danger of breaking their agreements with the banks.

He said as opportunities to source fresh funding in the market are scarce, more care providers are looking to sell off their property to balance the books, but prices are low in the current market, as is the demand for sizeable residential developments outside of the capital and the south east of England.

Mr Grant added that some care companies sold off their properties when the prices were at their highest in order to make the capital and then rented them back, meaning they now no longer have anything left to sell.

Many care homes were built as property investments, but falling values in the market now mean that many of the investors who put up homes are 'trapped' as they can't afford to sell them.

Caroline Abrahams, Director of External Affairs at Age UK, commented: 'These figures reflect that the care system is underfunded and in crisis. When an older person goes into a care home they want to view that as somewhere there'll be left in peace to live their life and not having worry and anxiety that they could have to move. A sizeable proportion of people in care homes do have dementia and they need continuity not unsettling change.'

Copyright Press Association 2013