Record number of UK care homes declared insolvent

Seventy-five companies failed in 2016 as councils cut contributions and wage increases raised cost of frontline staff

A record number of care home businesses failed last year as the financial pressure on social care in Britain took its toll. New government figures show that 75 care home businesses were declared insolvent in 2016, up from 74 the previous year.

The failures mean that in total 421 care home businesses have collapsed since 2010. The figures cover nursing homes, homes for the elderly, residential care activities for learning disabilities, mental health, and substance abuse. FRP Advisory, the consultancy firm, said that care homes were the only industry in the UK to have suffered from rising insolvencies over the last seven years.

Care homes are under pressure because local authorities have cut contributions for residents, while costs – particularly staff overheads – have been rising. Philip Hammond, the chancellor, announced in the March budget that an extra £2bn of funding would be granted to social care in England over the next three years.

Before the budget, the government had been heavily criticised for failing to support social care. Martin Green, the chief executive of Care England, which represents care providers across the country, accused the government of abdicating responsibility for social care to local authorities.

“My view is that if you ask me who is to blame, it is the government,” he said. “The government should be delivering a very clear vision for what social care is, they should be giving clear expectations to citizens about what they should expect from the system and what they should expect to pay for. None of that is happening.”

Chris Stevens, partner at FRP, warned that insolvencies in the sector were likely to remain high this year. He said: “The fall in sterling against the euro will exacerbate pre-existing pressure on staffing costs in a sector reliant on overseas workers to fill frontline staff vacancies, and where margins have come under increasing pressure from the rise in the minimum wage, pension costs and cuts in local authority funding.

“The care home sector is beleaguered due to all local authorities facing overall double-digit budget cuts for this current financial year under way and beyond.”

The care home sector will be in the spotlight again later this month when the competition watchdog delivers its interim report. The Competition and Markets Authority is studying how the market works and whether there are grounds for consumer enforcement action.

The regulator has the power to make recommendations to the government and the industry about necessary changes and can also threaten businesses with legal action if they are deemed to have breached consumer laws or engaged in unfair commercial practices.

The watchdog has already received complaints about care homes continuing to charge families for weeks after the death of a relative. The families are being charged for sums that can amount to thousands of pounds to cover for the time it can take for a room to be relet.


Graham Ruddick

The GuardianTramp

Related Content

Article image
Competition watchdog to investigate UK care homes
Regulator intervenes amid reports of unfair practices and contracts within the cash-strapped sector

Patrick Collinson

02, Dec, 2016 @1:19 PM

Article image
Sunrise care homes group to pay £2m compensation over upfront fees
Residents paid thousands of pounds without being told what the money would be used for

Angela Monaghan

09, May, 2018 @11:00 AM

Article image
A shocking way to fund UK care homes | Nils Pratley
The Four Seasons Health Care crisis is mainly down to financial engineering gone wrong. Have we learned nothing?

Nils Pratley

12, Dec, 2017 @2:21 PM

Article image
Families still being charged thousands in care home fees after relative’s death
Bereaved billed up to month’s worth of care, despite UK competition regulator saying such charges are likely to be illegal

Anna Tims

16, Jan, 2023 @7:03 AM

Article image
Minimum wage is least care workers deserve | Gavin Kelly

Gavin Kelly: If we really care about elderly people, the practice of paying care workers less than minimum wage must be stamped out

Gavin Kelly

18, Apr, 2012 @8:30 PM

Article image
The Guardian view on social care funding: can’t pay, must pay | Editorial
Editorial: Carers deserve to be paid the minimum wage overnight. Politicians must work together to provide sustainable funding


30, Jul, 2017 @6:43 PM

Article image
Urgent talks over future of Four Seasons care homes in UK
Creditor H/2 makes concessions amid crisis at health firm caring for 17,000 elderly and vulnerable people

Rob Davies

10, Dec, 2017 @1:08 PM

Article image
Care homes charging for rooms after residents die, watchdog finds
Competition and Markets Authority finds families have been charged fees for ‘extended periods’ after death of residents

Graham Ruddick

17, Apr, 2017 @3:42 PM

Article image
How private care firms have got away with breaking the law on pay

Zero-hours contracts with unpaid travel time means up to 220,000 care workers get less than the minimum wage

Randeep Ramesh, social affairs editor

13, Jun, 2013 @3:46 PM

Article image
Care workers forced to cut short home visits or be left out of pocket | Melissa Viney
New figures show more than half of councils don’t insist that agencies pay staff for their travel between appointments

Melissa Viney

29, Jan, 2019 @2:00 PM