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Care home insolvencies up 18% in a year

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CARE HOMES falling into insolvency have leapt by 18%, new figures reveal.

According to Moore Stephens, some 47 care home operators in England and Wales became insolvent last year, up from 40 in the previous year.

The research shows insolvencies in the sector has risen by 34% over three years, when there were 35 insolvencies in 2012/13.

Local authority spending on care homes continues to fall, as government subsidies are slashed with estimates suggesting that there will be a £2.9bn annual funding gap in social care by the end of the decade.

The sector is finding it increasingly difficult to find finance for the sector after the financial restructuring of the Four Seasons group, Britain’s biggest care home operator.

Mike Finch, partner at Moore Stephens, said:  “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.

“Although legislation giving local authorities powers to increase council tax by 2% to help fund social care is a step in the right direction, there is real concern that this will not meet the spike in demand caused by the UK’s aging population.

“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.

“Many care homes have also lost control over their increasing property costs by selling ownership of the property they occupy to an investor and then renting the property back from the same investor with pre-agreed rent increases they can no longer afford.”

Moore Stephens adds that with the UK’s aging population predicted to rise by 12% – or 1.1m – between 2015 and 2020, local authority funding is set to be stretched further causing many care homes to come under increasing financial strain and face closure.

The government’s introduction of a mandatory national living wage from April 2016 is set to further increase pressure on the care homes sector as staff costs will rise.

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