All is not well in the UK Care Home market

Colliers International produce a regular review of the UK care home business. The most recent edition does not make for happy reading for all concerned in this market.

This is the report’s conclusion

Key performance indicators for the second half of 2010 illustrate the impact of the varied pressures on operators. Government spending cuts, slowing housing market, lack of bank funding and a continued focus on alternative forms of elderly accommodation, rather than the traditional care home model, is putting pressure on profitability.

With below-inflation Local Authority baseline fees settlements, there is continuing pressure on operators to keep care standards high while keeping costs down. We are at a turning point where real average weekly fees will begin to fall due to government funding cuts. For those operators that have minimal exposure to the private pay market, diversification into alternative forms of care or a focus on specialised services, such as dementia care services, will become increasingly important.

The one ray of hope that Colliers offers the industry is that the financial pressures that are being put on local government might persuade them from attempting to run their own care homes and give responsibility to the private sector.

There is a perverted logic that still pervades parts of central and local government (and far too many UK voters) that it is better to offer the public an inferior service rather than allow the private sector to operate and supply cheaper and more efficient services. The fact they might make a ‘profit’ means they are somehow evil.

The report highlights this fact – another quote.

Local Authorities across the UK – operate approximately 920 homes (elderly and/or dementia) with circa 30,600 beds. These homes are filled in priority to those in privately operated homes despite many of these homes being of relatively poor quality. Colliers believes that many of these Local Authority homes are no longer fit for purpose, furthermore Local Authority operated homes tend to be much less efficient than their peers in the private sector. It is estimated that the average weekly fee per resident is £400 more in a Local Authority home (in some cases, this equates to almost 100% additional cost over the alternatives).

Let’s hope that the recession puts an end to this dogma and that common sense prevails. However, it is going to be a tough time in the care industry for the foreseeable future. Dick Stroud