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Stark warning for care home sector

A recent report by a top ten accountancy firm has warned that one in every eight care homes are at risk of insolvency within the next three years.

Increasing costs and government cuts have placed significant financial pressures on care homes who are struggling to handle the increase in demand.

The report comes following the introduction of the national living wage which, according to the report, is likely to lead to care homes being unable to fund the levels of staff required to cope with the increase in demand being placed on care homes.

This financial pressure could well lead to significant financial struggles for care homes and the risk of insolvency is a real threat.

This is a concerning development for the industry given the rising age of the UK population.

Many lenders involved in these situations may feel uneasy at collecting debts at the risk of forcing care homes into insolvency, especially given the potential for bad press that is likely to be attached with doing so.

Lenders may prefer to adopt a more lenient approach towards care homes in financial difficulties.  They may opt to delay the collection of outstanding debts in favour of extending loan terms until a later time, in the hope that the financial climate will ease and care homes may be able to continue business as normal.

However, there is no certainty in this approach and ultimately rising debts may lead to large numbers of care homes falling into insolvency unless further funding is provided from either Local Authorities or private investors.

For more information or advice on this, please contact Annabel Whittaker on 0115 9 100 256 or send her an email, or Thomas Butcher on 0115 9 100 238 or send him an email.

Posted on January 16, 2017

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