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Reviewing the ‘cautious confidence’ of a provider survey

Blog Post by Des Kelly OBE, R&RA Trustee

11 May 2019 “Challenges exist but sector remains confident” declares the annual UK care sector roundtables and survey report 2018-19 convened by Caring Times (with Barclays, Knight Frank and Pinsent Mason). Now undertaken for the last 8 years the survey (and the events) provide valuable insight into developments and trends as well as levels of confidence. The results this time round are of particular interest as they cover the uncertainties surrounding exit from the EU.

The biggest challenges are unchanged however with staffing issues top of the list. Rising staff costs are a concern for 75% of providers and only 14% saying staffing was not a concern

The survey found that just 3% of providers thought it would be positive (compared to 5% in 2017) with 54% saying negative (up from 41% in 2017) and those thinking it would have no effect at 43% (from 54% in 2017). Meanwhile, 63% of providers were extremely or very confident in their business. In the main this related top strong occupancy with 76% reporting levels above 90%.

The biggest challenges are unchanged however with staffing issues top of the list. Rising staff costs are a concern for 75% of providers and only 14% saying staffing was not a concern. Staff recruitment was also cited as an issue of concern. Providers identify reputation as another priority. Local Authority fees cuts remain an important area of concern for 66% and, in addition, 28% report a decline in private fee revenue.

Perceptions of regulatory activity is interesting as two thirds of responders to the survey indicated that CQC had been a positive impact on the sector.

Elsewhere the survey data from Knight Frank paints a mixed picture of increases in both occupancy and average weekly fees whilst profit margins are slightly down. Occupancy is seen to be at a record high with its sixth consecutive yearly rise to 89.4%.  Staff cost increases were due to the National Living Wage, the difficulties of recruiting nurses and rising agency costs. There are however significant regional variations with staff costs as a percentage of revenue between 52.9% (in the South East of England) and 71% (in Northern Ireland). All these have contributed to a slight drop in average profitability to 28.3%. Profit margins for care homes mostly reliant on LA funded residents have reduced in the last year from 20.7% to 15.9%.

In my view, these numbers are further evidence of a sector in a state of crisis. Whilst some providers are managing to keep afloat, others are not – 226 care homes closed in 2018 with the loss of 6,740 places. Although 90% of these were rated as Inadequate or Requires Improvement by CQC so obviously quality concerns are relevant it seems likely that staffing difficulties and rising staff costs were also a major factor in their exit from the sector. Rising occupancy is simply the product of a reduction in supply. And costs look certain to continue to rise due to the National Living Wage, pension contribution changes, Brexit, LA fees, demands of regulation and standards. It seems prudent therefore to prepare for continued uncertainty ahead … despite the positive spin of this survey report.

Des Kelly OBE


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