The well-publicised and spectacular fall from grace of Southern Cross illustrated a sector with endemic problems, left ravaged by austerity cuts in public expenditure. Whilst Southern Cross may have secured a stay of execution, the traditional residential care home model is now outdated. Fundamental change appears essential for a sector burdened with expensive, uneconomic and over-leveraged facilities, according to restructuring experts MCR.
Sarah Bell, Partner at MCR, states: “Historically, an increasing ageing population, rising property prices and a steady flow of income from Local Authority contracts made care homes an attractive proposition for investors. Times have most definitely changed. The poor performance of some care homes stems partly from a series of miscalculations by owner operators and misplaced assumptions about sector dynamics,”
“Reduced Local Authority fees, rising rents, a growing focus on alternative methods of care, an uncertain regulatory environment and increased operating costs are just some of the factors that have contributed towards the perfect storm that has landed in the care homes sector,” she added.