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Care Homes: Advice for businesses struggling in the nursing home industry

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Updated: 16th January 2020

A deepening crisis in the UK care home industry is causing severe financial difficulty for nursing home and care home businesses, and creating considerable uncertainty for long-term residents.

The situation was brought into sharp focus earlier this year when Four Seasons Health Care, one of the largest care home groups in the country, went into administration. So what are the industry-specific challenges you’re facing as a care home business owner, and is there anything you can do if you’re close to insolvency?

Problems in the care home industry

Burgeoning debt

The residential care home sector faces high levels of debt, particularly in relation to their premises. These are typically larger than average buildings, many of which house vulnerable residents with complex care needs, and ongoing maintenance is just one issue. Pressure on working capital is further compounded by rising energy costs - an area where care homes can’t cut back given the nature of the services they provide.

Staff recruitment and retention

Staff costs represent a significant proportion of overall costs for care homes and nursing homes, with lower-paid workers typically forming a large proportion of staff numbers. Rises in the National Living Wage (NLW) have significantly increased the costs of employment, and placed added pressure on resources that were already under severe strain.

An additional factor for nursing home businesses is the requirement to hire suitably qualified nursing staff to care for their residents, and carefully consider the nurse:patient ratio to ensure service provision is ‘fit for purpose.’

The ageing population

Our ageing population has increased demand on existing care homes, creating additional pressure on resources. Many businesses in the sector need to invest in additional facilities, but often lack the capacity to do so.

Government funding cuts

Local government funding has declined since austerity measures were introduced in 2008, but nursing home businesses are expected to provide high quality nursing care with restricted access to vital funds.

Professional support for business owners in the care home industry

The operating environment for care home and nursing home businesses is certainly challenging, but it is possible to protect your business from liquidation. Seeking support from licensed insolvency practitioners (IPs) should be your first step, as you’ll receive reliable advice on the best options.

So what might these include? Here are a few possibilities that could be suitable:

Additional finance

You may be able to secure additional finance for the business from alternative lenders, such as invoice financiers. Alternative finance can be a good option given its flexibility, and ease of application when compared with standard business bank loans.

Extra time to pay your tax

If the business is experiencing temporary financial difficulty and you believe it could recover given time, you may be eligible for HMRC’s Time to Pay arrangement (TTP). This is an instalment plan that helps you get back on track if you’ve fallen behind with tax payments, and typically offers between three and six months to repay your tax arrears.

Company administration

When your business enters company administration all creditor legal action ceases, giving you time to formulate a plan for recovery. This could include restructuring your debt to reduce repayments, for example, renegotiating contracts, or generally streamlining the business.

Real Business Rescue can provide further advice if your care home business is struggling. We’re a major part of Begbies Traynor, the largest professional services consultancy in the UK.

For more advice and information tailored to your business, please contact one of our partner-led team. We offer free same-day consultations, and operate an extensive network of offices throughout the UK.

Jonathan Munnery


0800 644 6080
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