By John Wakeford
The boards of larger providers looking to further consolidate a fragmented market are now eyeing struggling sectors like hospitality and retail, which have been forced to shed senior posts in recent months, for the vision, ideas and drive they need to upskill the quality of their management.
The UK’s £16bn a year residential care sector serves 410,000 residents in 11,300 care homes. With 5,500 independent providers accounting for 84 per cent of the market, there is huge potential for consolidation.
The sector has attracted significant private equity investment in recent years, with more than £1.8bn spent in 64 retirement and nursing home deals according to PitchBook. Healthcare advisory company LaingBuisson says PE firms and funds now own 13 per cent of UK nursing and residential homes, with 56,700 beds. They include HC-One with 271 homes, Four Seasons with 203 homes and Care UK with 113 homes. But many of the independent operators who dominate the market run only one or a small number of homes.
Funding for care is split between those who self-fund (41 per cent), local authority funded (49 per cent) and the NHS (10 per cent). The average life expectancy of a resident requiring specialist nursing care is 12 months, with a weekly cost of around £900. For a residential care home resident supported by care assistants, average life expectancy is two years, with a weekly cost of around £650. Total residential care costs therefore range on average from around £50,000 to £70,000. The benchmark for self-funding is having assets above £23,250, and many people are forced to sell their family homes to pay for their care.
Like most industry sectors, residential care has had a difficult year. Two in five care homes have suffered a Covid outbreak over the past ten months, with the resulting doubling in deaths reducing occupancy rates. Costs associated with infection control including procurement of PPE, and staff sickness increasing the sick pay and agency staffing bills, have also contributed to declining margins.
But the longer term outlook for the residential care sector is healthy, with a massive projected increase in demand.
The sector has grown by 4.5 per cent since 2015 and the ageing population will undoubtedly continue to drive increasing demand for care home services. As life expectancy rises, the 65+ population in England is projected to increase by 34 per cent between 2020 and 2035 from 10.5m to 14.1m people. The Office for National Statistics has predicted a 36 per cent growth in the 85+ population alone in the decade to 2025, from 1.5m to 2m.
A report by Skills for Care published in October 2020 estimated up to 520,000 extra jobs would be needed in the adult social care sector by 2035 – an increase in staffing of 32 per cent.
But the sector faces major challenges meeting this ever increasing demand. In 2019/20 staff turnover rates topped 30 per cent and 7.3 per cent of the roles in adult social care were vacant, around 112,000 vacancies at any one time.
Almost a quarter of staff are on zero hours contracts, and with average pay for care workers in the independent sector at just £8.50 per hour the industry’s low pay reputation has traditionally hampered recruitment.
The current economic downturn has, however, seen an upturn in interest from people from a variety of employment backgrounds, many of whom who have found themselves out of work for the first time.
Whilst the number of care home beds is currently increasing, a beds crisis is looming with thousands of smaller, outdated care homes at risk of closure over the next five years according to research by Knight Frank. An estimated 70 per cent of care home facilities were built prior to 2000 and will need upgrading and refurbishment.
All this amid increasing scrutiny from both regulators such as the Care Quality Commission, which grades and issues reports on care homes, and the media, which has turned its spotlight on residential care in the wake of the Covid outbreaks.
Seeking to address all these challenges, the larger providers are now looking outside the highly regulated sector to attract new executive talent. Senior managers in industries where customer service expertise and commercial acumen are both key, are being encouraged to consider newly created executive positions in residential care.
Working on a national basis, recent executive search assignments in residential care we have fulfilled include numerous General Manager roles as well as Chief Financial Officer positions, and we have a number of similar opportunities in the pipeline.
I am keen to talk to both residential care providers looking to upskill the quality of their management, and executives who are interested in joining this vitally important and fast growing sector at such an exciting time. Please contact me for an informal, confidential discussion to find out more.
John Wakeford is a founding director of HW Global Talent Partner. With a specific focus on Financial Services, CFO, Business Transformation, Care and Hospitality, he heads the Interim business. Contact him at johnw@hwglobalpartner.com or +44 (0) 113 243 2004.
