Scottish Care Homes – The Financial Realities

Research by social care business rescue specialists, Opus Restructuring & Insolvency, shows that Scottish-registered care home businesses were in better financial shape than their counterparts in the rest of the UK.

The research looked at the latest accounts of 444 Scottish care companies and found that:
• They had a better financial rating by business health monitoring experts, Company Watch of 53 out of 100, compared to 49 in the rest of the UK
• 25% were in the Company Watch Warning Area and therefore at a one in four risk of filing for insolvency, the figure was 28% south of the border
• Only 14% were ‘zombie’ companies with negative balance sheets, as against 20% elsewhere in the UK
This outcome may well reflect the support given to independent care home operators through the National Care Home Contract, which sets the rates paid by councils for publicly-funded residents and which previously guaranteed a 4% profit margin.

Now the Convention of Scottish Local Authorities (COSLA) has effectively imposed a ‘take it or leave it’ 6% uplift in rates for the current NCHC renewal at a time when inflation has pushed costs sky high, interest rates have soared and there is an urgent need to raise staff pay rates to stem the rising tide of job vacancies in care homes.

In a recent BBC interview with Karen Hedge, Deputy Chief Executive of Scottish Care, which represents independent operators, she said the deal was the best COSLA could realistically offer but still “doesn’t cut it”. Care industry leaders have warned that on average one care home in Scotland is closing every week.

Opus Restructuring & Insolvency partner, George Dale said:
“This is a tragedy unfolding in front of our very eyes, with increasing numbers of homes closing when there is already a shortage of capacity to cope with rising demand from a rapidly ageing demographic. Not only is it a financial disaster, but deeply worrying for residents and their relatives, rightly concerned at the health and social impact of the disruption of moving elderly and vulnerable residents, possibly far away from their friends and family.”

The full Opus report on the residential care sector can be found here.