North East care businesses are facing up to challenging conditions in their industry better than their peers in most of the rest of the country.
According to industry analysis by insolvency and restructuring trade body R3, the proportion of medical nursing home operators in the region with a heightened risk of entering insolvency in the next year (30%) is around 25 per cent lower than the national average (37%).
Providers of child day care activities in the North East are in a similar position, with 24% of firms facing this heightened risk compared to a national average of 30%.
And regional providers of residential care activities for people with learning difficulties, mental health issues or substance abuse problems are three times less likely to run into trading difficulties than the national average (6% versus 19%).
On the downside, North East providers of residential care activities for elderly and disabled people have a four percentage point higher risk of entering insolvency than the national average (23% versus 19%), while the regional and national averages for residential nursing businesses are almost identical.
R3 uses Bureau van Dijk’s ‘Fame’ database to measures companies in a range of industries’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.
According to figures from the Care Quality Commission, the number of care homes overall in England fell from 18,068 in 2010 to 16,614 last year, despite the growing need linked to the UK’s ageing population profile.
Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Law Firm, says: “Factors such as substantial pressures on local government funding, increasing employment costs through the national living wage and pensions auto-enrolment, increased regulation and rising property maintenance costs have all combined in recent years to create an almost perfect storm for the residential care home sector.
“In such circumstances, it’s hardly surprising that we’ve seen many care home operators going out of business, especially among smaller independent operators, as well as a substantial degree of mergers and consolidation across the industry.
“It’s encouraging to see that the North East care sector is generally on a more stable footing than the national average, which may be linked to the regional mergers and disposals we’ve seen in the sector in the last few years and the ready availability of staff to fulfil the roles offered therein, but this is no guarantee of an easy ride in a future where market conditions are almost certain to get even more challenging.
“Management teams in any industry that can foresee financial or operational difficulties arising in the future need to move quickly to address them, so they can access the widest possible range of solutions for putting things right.
“Taking this approach in a sector such as the care industry, where the well-being of vulnerable people could be put at risk through business failure, is doubly important.”