Number of care homes going bust rises by more than a third in the last three years as national living wage is set to put more strain on the sector

Shruti Tripathi Chopra
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2015 General Election - Elderly Care
The national living wage is set to put more strain on the sector (Source: Getty)

The number of care homes going bust has risen 34 per cent in the last three years, according to research by accountancy firm Moore Stephens.

The report found that the government’s introduction of a mandatory national living wage from April this year is set to put more financial strain on the sector as staff costs rise.

The number of care home insolvencies jumped by 18 per cent, with 47 care home operators in England and Wales becoming insolvent last year, up from 40 in the previous year.

According to research from the Local Government Association, the fall in local authority spending on care homes will lead to a £2.9bn annual funding gap in social care by 2020.

And Moore Stephens pointed out that finding finance for the sector has become increasingly difficult after the financial restructuring of the Four Seasons group, Britain’s biggest care home operator.

Read more: UK care homes at risk of financial ruin as Living Wage costs bite

Mike Finch, partner at Moore Stephens, 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.

"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."

Finch warned that with the UK’s ageing population predicted to rise 12 per cent or 1.1m between 2015 and 2020, the closures will be especially untimely.

"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," Finch added.

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