Recession: Care home market is resilient, expert says

The care home market is holding up in the recession and there is no risk of significant numbers of home closures, market expert William Laing has said.

His comments followed warnings from the Local Government Association that one in seven councils had experienced pressures on the supply of places due to care home closures, and three-quarters were anticipating the same, due to the recession.

Demand steady

Laing, director of Laing and Buisson, said demand for places was steady as the decline in demand from councils was being matched by increases in the funding of places by the NHS and private individuals.

While occupancy levels in homes had fallen slightly from 90% to 89%, as of last month, this reflected increased capacity in the sector.

No risk of large number of closures

He added: “Are there going to be a large number of closures? No.”

But Laing said that care home operators were expecting profits to be squeezed as a result of local authority fee increases implemented this month.

Fee squeeze

Laing said latest estimates put the average increase at 1.5% to 2%, below the level required for homes to maintain profit margins.

He also said that some operators that had borrowed heavily had been particularly hit by the drying up of the credit markets, but said this was unlikely to translate into home closures at the moment.

But he said that another round of tight fee increases from councils next year could lead to closures.”Those care homes which have borrowed heavily may find that they are in difficulties because their revenues would not be sufficient,” he said.

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