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Home > Corporate > Press Release > 2009 Press Releases > Care Homes Ready to Meet Recession 'Head-On'

April, 2009

Sector remains "defiant" in face of financial crisis, according to The Consortium Care

Increased pay for staff, ever-decreasing local authority funding and spiralling fuel and food bills – coupled with the deepening recession – are forcing many care homes to cut costs in order to stay in business.

Not only that, but the expected forced mass-exodus of non-EU migrant workers is leaving many care home managers with hugely expensive gaps in their workforce to fill.

Yet despite this gloomy backdrop the majority of care homes believe factors such as the rising numbers of elderly people requiring round-the-clock care mean they are ideally-placed to weather the economic storm and are even confident about their long-term prospects for survival.

That's according to research carried out exclusively for Caring Business by The Consortium Care, the UK's leading provider of care home supplies and services, which asked care home owners and managers about their prospects during the recession.

For months now there has been feverish speculation about what effect the worldwide credit crunch – and subsequent economic downturn – would have on the UK's care sector.

Some of the industry's biggest names, including The Four Seasons and Southern Cross, have reported difficulties recently, prompting widespread loss of confidence across the sector.

In January the UK officially moved into a recession, and more than a quarter (27 per cent) of respondents to our survey said they were already feeling the pinch and were re-assessing how their businesses were run and considering how to cut costs accordingly.

Although an optimistic 30 per cent said their businesses were healthy and they were yet to experience any negative effects, the vast majority of respondents (43 per cent) were wary of the downturn and said it might be too early still to judge the recession's impact.

"We may only be in the very early days of this recession, but we are already starting to see a significant negative impact on many care homes and, with commentators predicting the downturn to be longer and deeper than expected, you would imagine those in the care sector to be particularly downbeat about this situation," said Brian Potter, Marketing Director at The Consortium Care.

"However, according to our research 63 per cent of care home owners and managers are confident about their businesses' chances of survival during this recession, so maybe it's not all doom and gloom in the sector."

One of our respondents underlined that despite the recession people would be unwilling to cut costs when it came to providing care for their loved ones.

The respondent said: "In these difficult times it is imperative that high standards are maintained. My reputation as a home of quality continues to attract clients who are prepared to pay a fairly high fee in return for good care and value for money."

"This is a common theme," said Brian Potter. "Few, if any, among us would choose 'second best' when it comes to care for our loved ones, even in a recession.

"Indeed many of the industry's leading lights are predicting that the businesses most likely to survive this recession will be the ones who place a heavy emphasis on providing a quality service to their customers, rather than a cut-price option."

Staffing costs, especially following October's increase in the minimum wage, account for up to half of most care providers' costs and were cited by more than a third (36 per cent) of respondents as being the main challenge facing their business in 2009.

New extra holiday entitlement, giving workers the right to take bank holidays off in addition to their annual leave, is also piling on the pressure.

"No one would argue care workers deserve every penny for the dedication and commitment they show to their employers," said Brian Potter. "However the increase in the minimum wage couldn't have come at a worse time for many care home owners who are struggling to make ends meet as it is."

Councils are also feeling the economic squeeze, with many local authority finance officers reporting increases in demand for elderly care as a direct result of the economic downturn. On top of that councils are facing tighter central government grants and the spectre of deflation.

As a result, a further 21 per cent of care homes in our survey said obtaining a satisfactory level of local authority funding was their main concern for the year, with 67 per cent predicting a funding increase of no more than one to two per cent and more than a quarter (28 per cent) predicting no increase at all.

Also of concern were food and fuel costs (seven per cent), particularly during winter months.

And in the wake of new immigration controls, which see non-EU migrant care workers returned to their country of origin, a further seven per cent of respondents chose recruitment of adequately-qualified staff as their number one challenge for 2009.

Brian Potter said: "A report published recently by the Local Government Association highlights that care homes will be one of the hardest-hit sectors by these new regulations on migrant workers.

"The report states that a combination of new restrictions on non-EU workers and the possibility of migrant workers, who provide the backbone to the care system, leaving the country could make it impossible to recruit staff without increasing care costs, so heaping even more financial woe on owners and managers."

When asked what the typical level of fees they were currently charging their residents each week was, a quarter of our respondents said it was "more than £600". Next came "between £400 and £450" (21 per cent) followed by "between 300 and £350" (17 per cent). Eight per cent said they charge "between £350 and £400 per week", with the same percentage charging "between £250 and £300". The remaining four per cent said they charged "between £550 and £600".

More than half (52 per cent) of our respondents said they would review their current suppliers and look for better deals in order to meet the challenges thrown up by the recession head-on.

"With increasing utility and cleaning material costs a more realistic budget against service users' needs is being looked at and, where required, adjustments being made," said one of our respondents.

"Fuel costs are one of the biggest concerns in the care sector," said Brian Potter, "and no doubt many owners and managers will be bracing themselves for the next round of energy bills following the particularly harsh winter which we have just suffered.

"The good news is it seems some energy companies are looking at decreasing the amount they charge for their services, which will be a welcome relief to everyone involved in the care industry."

He added: "We are entering a period where ‘every penny counts' and those holding the purse strings will undoubtedly be reviewing all expenditure and looking for cash savings wherever they can find them."

A quarter of those who took part in the survey said they had noticed a decrease in occupancy levels in the last six months and a further 66 per cent said their occupancy levels had remained broadly the same. However just 25 per cent of those reporting a drop said this was definitely down to the worsening economic conditions. Just nine per cent reported an increase in occupancy levels over the same six month period.

One respondent pointed out that the recession might not be to blame for the drop, saying: "Enquiries and occupancy levels are down across our local authority, but that could be down to the heavy emphasis which has been placed on keeping people in their own homes for longer."

Another said: "We are a very small home for people with learning disabilities. We have turned to becoming specialised care providers in order to maintain a healthy demand for our services. This is the only way we would be able to survive as a business in this current economic climate."

Brian Potter said: "I regularly talk to owner managers in the care sector and the feedback I get is that more and more providers are feeling under pressure, but rather than bury their heads in the sand they are facing this economic crisis head-on and are determined to do everything they can to keep their businesses going, a view which is reflected in this survey."

Inevitably given the property market crash many care home owners are finding it hard to sell their properties and businesses. One respondent commented: "Nursing homes are not able to sell their properties at sensible prices, so are ‘hanging on' until things improve, and those who are prepared to accept less for their homes are still finding difficulties selling."

"We're now seeing that the current financial crisis is likely to be tougher than most people anticipated with no sector immune from its effects," said Brian Potter.

"However, from the results of this survey it's clear that even though care homes are starting to feel the pinch, they remain defiant in the face of economic gloom and are more than willing to meet the challenge while providing excellent services and support to those who matter most – the people in their care."