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Many home care firms are at risk of insolvency

One in four of the UK’s home care firms at risk of insolvency

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 3 minutes

A recent Panorama investigation has found that a lack of money is prompting many care firms to end their contracts with councils. A Freedom of Information request found that over 95 UK councils have been affected by care firms canceling their contracts as a result of not being able to deliver the service required for the amount of money they are being paid.

The Local Government Association (LGA) said this was as a result of historic under-funding and an aging population, both of which are putting a huge strain on council budgets and the businesses they employ to provide care in the community.

Some of these businesses are finding it difficult to recruit the staff they need or retrain them due to these funding pressures and the impact of the National Living Wage (NLW) raising the amount care firms are spending each month.

Insolvency is on the rise in the social care sector

From the research Opus Restructuring and Company Watch carried out on behalf of Panorama, they found that 69 home care companies closed in the last three months and 25% of the 2500 UK home care companies operating are at a risk of entering into insolvency.

Councillor Izzi Sercombe from the LGA commented on the findings as part of the investigation;

“These figures show the enormous strain providers are under, and emphasises the urgent need for a long-term, sustainable solution to the social care funding crisis.”

The government was approached for an interview regarding these new finding but they declined, only commenting to say that English councils have so far received £9.25bn for social care. The government has also recently announced £2bn for social care over the next three years which they say should help to plug the funding black hole.

These latest findings come only six months after the Care Quality Commission (CQC) warned that adult social care was at a tipping point. The Centre for Workforce Intelligence estimates that to cut the pressure and ease the demand on this sector, at least two million more carers are needed by 2025 in England alone.

Speaking to some of the companies which have recently left their council contracts, the BBC found that although some of the companies had been offered pay increases by the council, they still would not be able to provide the service required. This is due to many factors including the cost of staff wages, mileage allowance for time spent traveling between clients, pension and national insurance contributions.

Colin Angel, policy and campaigns director of United Kingdom Homecare Association, the industry’s trade body, said

“Many companies were struggling and they really do not know whether they’re going to be able to continue in business, beyond the next year”.

This shortage of carers is creating problems for the NHS, specifically with bed blocking, with elderly people stuck in hospital wards. The majority of these people are waiting for a home care package to be put in place prompting many industry professionals, including Liverpool’s director of adult social services Samih Kalakeche, to claim that there is a crisis in the home care services sector currently.

Regardless of the £2bn promised to adult social care, the industry feels that an increasingly aging population will mean that it will still not be able to keep up with demand. As insolvency looms for a quarter of these businesses, they will be hoping that the government will be able to put in place further measures to create a financially sustainable social care system in the UK.

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