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Research finds quarter of care home firms at risk

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More than a quarter of care home operators are at risk of insolvency, a new report has claimed. 

Financial analysts Company Watch and Opus Business Services analysed the published financial results of 6,158 operators across the UK and compared them to the accounts of companies which subsequently failed.

A total of 28% of operators scored 25 or less out of 100, placing them in a ‘warning area’ for financial viability.

The analysis also classified 745 operators as ‘zombie’ companies with liabilities greater than their assets.

Operators in the east and west Midlands had the joint lowest average rating of 51 out of 100.

The analysis looked at companies most recently submitted accounts, so did not take into account the introduction of the national living wage in April this year.

The report says the potential increase in annual cost to providers of the living wage is an estimated £414m, which it says is almost twice the total profits of the sector.

The most profitable region was found to be the south-east, where on average operators make an annual profit pre-tax profit of £93,000.

The lowest average annual profit of £19,000 a year was in the north-west.

The analysis did not include three of the five largest UK operators - Four Seasons, HC-One and Barchester Healthcare - as their parent companies are registered offshore, preventing access to comprehensive financial data.

However, the research did cover the operators of 96.4% of the UK’s care homes.

In conclusion, the report say: “Unless more public funding is made available, the risk is that more and more residential care home operators will leave the market altogether because the returns available do not justify the risk.”

Care England chief executive Martin Green this week told LGC that the funding crisis in social care meant services would cease to be available in areas with high levels of self-funders.

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