Care homes closing down

Care home are closing across the UK - protect yours

If you run or manage a care home, you may well be aware the sector is facing significant, long-standing challenges that, even before COVID-19, were threatening the financial viability of many care homes.1

In the decade between 2009 and 2018, almost 1,000 care homes, housing more than 30,000 residents shut their doors2, but there is no sign that the situation is improving. In fact, in the six years between 2015 and 2020, 1,578 care homes closed, forcing the relocation of around 48,600 vulnerable people.3

These were not ‘failing’ care homes. Of those that closed in 2020, almost half (43.8%) had a ‘good’ rating from the Care Quality Commission at the time.3

So, what is going on and how can you protect your care home from closure?

Why are care homes closing down?

The closure of so many care homes at a time when an aging population is driving more demand for care ‒ UK care home supply has grown by only 6% in the last decade, while the UK’s over 65 population has increased by 22% over the same period4  – is being driven by a range of factors.

There are long-standing issues like financial pressures and difficulties recruiting and retaining staff, but these have been compounded by more recent challenges arising from Brexit and the COVID-19 pandemic.

Financial pressure on care homes

Even before the COVID-19 pandemic, even the largest care homes struggled for financial viability – more than half generated a return on investment of just 5% ‒ while significant numbers were not financially resilient according to the National Audit Office.1

It seems likely that the impact of COVID-19 – which led to reduced occupancy rates5 and raised costs through the need for care home infection control6 – has only served to make matters worse.

Meanwhile, local authority funding for care homes has long been a source of financial pressure. As long ago as 2017, the Competition and Markets Authority warned that providers focusing on local authority-funded residents might exit the market due to much lower profit margins.1

Now, with many local authorities seeking to save money, many care home providers are warning that local authority care rates for 2022 will not cover their increased costs.7

For those homes reliant on publicly-funded care, that situation may get worse before it gets better. It is thought that local authorities with social care responsibilities in England are facing a £2.1bn funding shortfall next year8 while, longer-term, it is estimated that the cost of providing care for those residents will rise by 40% between 2018 and 2038.1

Care home recruitment and retention challenges

Financial pressures are also having a serious impact on care homes’ ability to recruit and retain staff.

Pay and conditions are undoubtedly playing a role, with many established care home workers leaving the sector in search of better pay and less stress – for instance, it is reported that in some cases, care home staff are earning 30% more pay as Amazon warehouse pickers9. Overall, the social care sector had a staff turnover rate of 28.5% in 2021, which is well above the national average of around 15%.10

Along with difficulties recruiting new staff, which have been exacerbated by Brexit , this has created a shortage of around 170,000 care home staff nationwide12. On top of that, the government’s controversial vaccine mandate for care home staff could see a further 50,000 care home staff leave the sector.13

Again, this is a situation that is set to worsen over time - growing life expectancies mean that 490,000 extra care workers will be required by 2035.14

Meanwhile, though the government’s social care cap promises new funding via a 1.5% rise in National Insurance, many in the industry argue that the share ring-fenced for social care will not be enough to address the significant issues facing care homes across the UK.15

How to protect your care home

There are, of course, no easy answers to the sector-wide issues facing care home providers. However, there a number of things individual providers can consider as a means of either protecting against financial pressures, or eliminating other risks that could leave the home struggling.

Diversify care home funding

At the strategic level, one priority for care homes may be to reduce their reliance on local authority funded care, by attracting a share of privately-funded residents.

It is estimated that that care home fees paid by ‘self-funders’ are, on average, 40% higher than those paid by local authorities for places in the same care homes16 – so a more even mix of self-funded and local authority funded care could help to reduce financial pressures and, in turn, help to address staffing issues.

Manage care home risks

Carrying out regular risk assessments and having effective procedures in place to manage risks could play a huge role in protecting your business.

There is a wide range of operational, day-to-day risks facing care homes, any of which could lead to damage or injury and, in turn to unforeseen costs. Some simple risk management measures include:

  • Infection control: With COVID-19 still very much among us, infection control is as important as ever – and failings here could have serious consequences. Read our infection control checklist for the latest guidance.
  • Manual handling and lifting: It’s such an everyday activity that it can be easy to forget the importance of proper manual handling procedures. Be sure to regularly update this policy, especially for new or agency staff.
  • Slips and trips: Many trips and falls are due to the general condition of the building. Carry out regular checks to prevent residents and staff tripping – for instance on frayed carpets or uneven flooring.
  • Pressure sores: Pressure sores can cause a lot of distress to both the resident and their family. Sores can be easily prevented through regular checks and dressing changes. Make sure your care plan is clear to all staff (long-term and agency), to maintain a high-quality of care.

Care home insurance

If the worst should happen, you need to be confident you have the right insurance in place to protect your care home. Our specialist team of care home insurance experts can help you to arrange package insurance, stand-alone insurance and risk management solutions for many types of care risk.


3. CSI Market Intelligence report - Say Hello Wave Goodbye 2020 -

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