Service users unaffected by care providers going bust

Social care users are unlikely to be affected by rising private sector insolvencies, say experts.

Figures released today have shown a 49% increase in the numbers of health and social care providers going bust.

However, William Laing, chief executive of care sector market experts Laing and Buisson, said the rise was largely due to mismanagement of finances by providers that had left themselves overly exposed to market forces. “Those people receiving services are not really affected,” he said. “Those who are, are the people who have invested.”

Laing said he did not expect to see care homes closing as a result of insolvency because the underlying businesses were still sound.

In most insolvency cases, businesses were no longer worth what investors had paid for them, resulting in debt problems that needed restructuring.

Andrew Cozens, local government association lead for adult social care, added: “Rises in insolvency may well be more to do with the attitude of the banks and there have been some instances where businesses have found it difficult to renegotiate their debt.”

Colin Angel, head of policy at the United Kingdom Homecare Association, said that when businesses did become insolvent, any gap in services was usually filled by the council or other providers, swiftly, without any disruption.

Angel added that there was pressure on providers to reduce prices but that councils had a role to play in easing risks of insolvency.

He said: “Prompt payment by the public sector is vital. Councils are the majority purchasers in their areas and poor payment can jeopardise providers’ cash flows – and raise the risk of insolvency – very quickly.”

Cozens added that the concerns that insolvency would leave people without services had arisen in the recession of the early 90s but the problem had failed to materialise at that time.

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