About 25 percent of Northamptonshire’s care homes are close to going out of business, according to analysis of 55 of them.
Data from Companies House shows that a quarter of the care homes looked at were in the ‘high risk’ category, financially.
And, furthermore,only five of the care homes analysed are currently making a profit.
Nick Hood of Opus Business Services, who analysed data collected by the BBC, said several factors were making the industry very precarious.
He said; “The care home sector is caught in a ‘pernicious profit pincer’, squeezed between Government austerity cuts limiting its income, and relentless upward cost pressures from rising labour costs and care quality improvement demands.”
A big issue is that the gap between Government funding and what residents actually cost is £300 per week each.
It means private residents’ fees have to be sky-high to in effect subsidise those of local authority residents.
Mr Hood said the vast majority of homes in Northamptonshire that he looked at were “barely profitable” and borrowing “far too much”.
Six of them were losing money and 44 were only breaking even.
The total borrowings of all the operators was £88m, equivalent to 35 per cent of the value of their businesses.
While this is manageable now, if interest rates start to rise - or when the effects of the Living Wage begin to unwind -Opus said many care home business in the county could be in danger of collapse.
Mr Hood said: “With an urgent need for more capacity as baby boomers age, it is difficult to see this ending well without significant additional funding being made available by the Government.”
Most companies are currently making a profit of about £17,000
Care homes database analysis by Company Watch showed the following:
- There were 55 Northamptonshire operators looked at.
- 14 of them (more than 25 per cent) are in the ‘high risk’ category, with a ‘financial health’ score of 25 or less out of a possible 100.
- Only 5 are making a profit
- Six are making a loss
-The remaining 44 are only breaking even.
- The total profits of all the operators is £6m, but if the two biggest – Avery Healthcare & St Andrew’s – are excluded, the remaining 53 companies only make a combined profit of £891,000, or £17,000 each.
- However, that figure is skewed by the fact that the biggest operator (St Andrew’s) has low borrowings of only 21 per cent, while Avery has “exceptionally high” borrowings.