Care homes, as with many other businesses, are faced with ever rising costs. Wage increases are a particular strain, with a 3% increase in the National Minimum Wage for the over-25s in October, and a further 7.4% in April 2016, along with the introduction of additional age bands.
Combined with a squeeze on fees paid by local authorities, this has contributed to a sharp rise in insolvencies in the care home sector, according to well publicised research by accountancy firm Moore Stephens. This mirrors our experience at LSH, with our current regional instructions including Croft Lodge and White House, in Teignmouth, Devon, and Kingsleigh House, in Saltash, Cornwall. All three properties are being marketed on behalf of Insolvency Practitioners.
However, our experience shows homes do not necessarily need to close. Teignmouth retained occupancy as high as 100%, with good fee levels combined with interest from a number of established operators looking to capitalise on the good reputation maintained during the administration process.
At the other end of the spectrum, Kingsleigh House in Saltash is a closed care home and received a high level of interest with contracts for the sale recently exchanged for alternative residential use, following an open marketing campaign.
The good news is that now we are into the new financial year for local authorities, we can report that most are making increases in their fee rates and privates (as ever) don’t seem to be resisting increases of 4% to 7%. Our view is that this issue will be self correcting quite quickly, if only because of the sheer volume of pent up demand. It will be noted that domiciliary care (the main alternative to care homes) has suffered a greater relative impact from the National Living Wage.
The current market appears to be increasingly polarised between well performing homes that command premium private and top up fees, and those often older style converted buildings, reliant on social services that are facing increasingly difficult trading conditions.