Monday, November 02, 2009

Where goeth the UK Residential Care Market

I have a particular interest in the dynamics of the UK residential and nursing care business. It is a business that is part consumer services, part property investment, part B2B and is about to be hit by the UK’s waking nightmare of plunging Government spending.

Mix into this concoction the fact that many care companies are wallowing under a mountain of private equity debt and even more are ill-equipped to tackle the required restructuring of their business models and processes and you have one hell of a mess. But, for the astute and entrepreneurial one hell of an opportunity.

Recently I "What’s going on in with UK residential care” that questioned if the Royal Bank of Scotland supposed £250 million of capital for the Care Industry was for new ventures or to support the numerous ill advised investments it had made in the past. Sorry, I keep writing Royal Bank of Scotland rather than its new name the UK Government (the UK taxpayers are about to own 83% of the bank).

I also wrote “Life’s going to be interesting in the UK care market” that talked about housing 21’s takeover of a domiciliary care company and what this means for the industry.

I have just finished reading two articles in the Health Investor (sorry subscription only). One of these quotes a lot from a report by Colliers that paints a rosy view of the industry, even though the profit margins are in decline.

What interested me was the correlation between GDP per capita and weekly fee for those in residential homes. As you can see the same strength of relationship does not exist with nursing homes. If my future business success was based on the healthiness of the UK's GDP per capita I would be seriously worried. This is exactly the emotion of the other article, as can be seen from this quote.
Professionals are nervous, individuals are nervous and the patients are nervous,” says Robbie Burns, chief executive of Clinovia, a home healthcare firm owned by Bupa. “There is an almost surreal nature to the situation – how banking systems can implode overnight is beyond comprehension to most people.” And the industry has every right to feel nervous. The latest government intervention to part-nationalise the UK’s leading banks is estimated to push public sector debt to above 50% of the annual national income.
Somehow I don’t think this is the last I will be writing about this subject. Dick Stroud

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