In April, one of Britain’s biggest residential care providers, Four Seasons Care, reported an annual loss of £264 million – putting even more pressure on a company £500 million in the red. The collapse of Four Seasons would have severe fallout for its residents – the firm cares for 18,500 elderly people in 62 homes – as well as the wider social care sector. Worryingly, the brand is far from an isolated example; recent research from the BBC suggests a quarter of care homes in the UK are currently at risk of closure, and many face an uphill struggle when it comes to raising capital following debt downgrades.
The reason for the sector’s perilous finances is due to a perfect storm of funding issues. The Government cut more than £4.6 billion from the social care budget during the last Parliament, and many local councils are further reducing their budgets despite increased revenues raised from council tax. Care providers subsequently see their revenues fall, as local government reduces the amount it pays them – risking lower standards and even forcing operators out of business.
At the same time, social care providers face significantly increased cost pressures as a result of the increase to the national minimum wage. There are an estimated 1.45 million workers currently employed in the UK social care sector – many of whom earn the minimum wage. On the 1st of April, the creation of a ‘living wage’ increased this to £7.20 an hour for all adults aged over 25, leaving the sector with an enormous rise in staffing costs. While social care workers provide a vital service and deserve to be well remunerated, the timing of this increase could not be worse from a financial perspective.
On top of this, providers have also had to face up to increased inspection costs from the Care Quality Commission (CQC), which add to the challenges the sector faces.
Unfortunately it seems that the government will do little to fix the state of the nation’s social care sector, which faces higher costs and less financial support. The recent budget provided the Chancellor with the opportunity to provide some relief – but problems were barely mentioned let alone confronted. With the purse strings unlikely to loosen over the next few years, councils must look to more affordable models like domiciliary care to meet the aging population’s needs.