The number of care home businesses falling into insolvency has jumped by 18%, says Moore Stephens, the top ten accountancy firm.
Forty seven care home operators in England and Wales became insolvent last year – up from 40 in the previous year.
Moore Stephens says that local authority spending on care homes continues to fall, with estimates suggesting that there will be a £2.9bn annual funding gap in social care by the end of the decade.
And they say the Government’s introduction of the National Living Wage is set to further increase pressure on the care homes sector as staff costs will rise.
Moore Stephens explains that it is 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, explains: “Care homes have come under increasing financial strain and, with a sharp increase in their wage bill, many more risk being pushed to breaking point.
“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 two per cent 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 ageing 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.”