Care industry comment from Morris Lane Chartered Accountants

Local authorities remain under financial pressure and whilst some freedom to raise funds for the provision of social care has been granted, it is still open to debate whether this will be sufficient. Whilst the local precept tax will help, central government needs to come up with a long term plan that takes into account the demographic changes that lie ahead and one that will better integrate the NHS & Social Care budgets. With the upcoming general election and a Green paper to be published later this year, the Industry has to continue putting pressure on politicians to address this issue.    

The good news is that some integration is already being seen, with the delayed discharge crisis within the NHS leading to patients deemed medically fit for discharge being transferred to Care Homes as social issues are worked through as it remains cheaper to place people in a home rather than retain them in hospital. Other initiatives are also underway across the country. 

A recent report from Independent Age highlighted that one in three care homes in the North West region are performing poorly. In Stockport, almost two-thirds are rated as inadequate or requiring improvement and 54% in Tameside were poor performers. Shockingly five local authorities have more than half of care homes rated "inadequate" or "requires improvement". Low levels of LA funding were one of several reasons given for this. Comparatively there are also more LA funded residents in the North than the South, the North East having the highest number.

With inflation on the increase Care Home operators face financial challenges as a result, although for many this is nothing new. Unless and until social care funding is more realistic to the costs involved then the key to success will continue to lie in maximising the number of private residents, as homes more reliant on LA funding will continue to struggle in comparison.  

Staffing remains a big issue, both in terms of retention and increasing costs. Minimum wage increases continue to have an impact, not only for the lowest paid, but also on pay differentials as these have been eroded. In addition auto-enrolment will see staff costs increase as contributions rise to 3% for employers.

Attracting and retaining good staff is a challenge as the private sector has to compete with the NHS, resulting in agency costs appearing on an upward trend. The consequences of Brexit, considering the high numbers of foreign workers employed within the Care industry may in time add further pressure on staff costs depending on any deal over immigration and worker’s rights being struck.

The good news is that the number of homes attaining an ‘Outstanding’ rating appears to be on the increase. This can only be good for the industry and hopefully the media will pick up on this – all too often the sector suffers a negative press, something local care associations must continue to address.

Interest rates remain low with Bank base rate looking set to remain at 0.25% for now. However it should be cautioned that historically the Government/Bank of England has used base rate increases as a means to control inflation so it may pay to keep an eye on the B of E monetary policy reports to gauge what might happen. Owners should be considering the impact of any potential rate rises and factor this in when setting or reviewing their budgets.

Morris Lane clients have enjoyed fairly stable or improved trading conditions in the past couple of years, with high occupancy levels being the norm. We expect this trend to continue, our clients are generally more optimistic than in previous years not withstanding that some headwinds remain.