Care Homes Under Pressure and Going Bankrupt (UK)

Care homes under pressure and going bankrupt

November 14th, 2011
Author: Jeff Taylor

The number of care homes that have gone bust is more than double the number of last year’s says a top accountancy firm.

Over the 12 months to September 30th 2011 73 care homes went bankrupt compared to the previous year’s 35, which equates to a 109% increase says the Top 21 accountancy company Wilkins Kennedy.

Local authority cutbacks, says Wilkins Kennedy, is putting pressure on care homes struggling with high debt and increasing rental obligations.

Partner at Wilkins Kennedy, Restructuring & Recovery, Anthony Cork, said “The care sector has gone through a long period of expansion during the boom years with many companies taking on large debts to fund growth. This worked fine as long as local Government funding kept increasing, but with the recession and the cutbacks that ensued, many care homes found themselves unable to service their debts. In a growing economy, they could have sold their property assets for redevelopment to reduce their debt levels, but this wasn’t an option because there are no buyers in the current market.”

Some care homes went into sale and leaseback deals so as to free up money for expansion schemes. But now they are faced with having no property and guaranteed annual rent increases, which are above market rates in this depressed property environment.

Even those care homes that managed to avoid such deals are feeling the pressure of local authority cutbacks.

“Care homes are a business with high operational costs. These include, for example, the wages of specialist nurses and carers. This makes them particularly vulnerable to a decrease in funding. Care homes now have to achieve a very high level of efficiency to avoid spiralling downward and ending up in insolvency.” Said Anthony Cork.

Wilkins cites some examples of care homes that have become insolvent:

Southern Care Group – The North Wales-based care home firm went into administration in October 2010. It employed 270 people and cared for up to 300 elderly people at the time.

The Winnie Care Group – The Cheshire-based group employed more than 250 people when it went into administration in April 2011. Eight care homes that were put up for sale as a result.

Grosvenor Care – A Stockport care home operator employing 150 people and operating four care homes when it went into administration in July 2011.

Ascot Care Homes Holdings Limited – The company operated 122 registered beds across owns five fully-managed care homes in Scotland and West Yorkshire before going into administration in December 2010.

SOURCE:     The Economic Voice
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