Finance
Care sector finance: a rapidly changing landscape
Jimmy Johns, director of corporate debt advisory – healthcare at Christie Finance, takes a look at the financial markets that support the care sector, and considers the current funding landscape
For the last two years, writing about the care sector and its supporting financial markets has been something of a challenge. This is a rapidly changing landscape, with political, economic, regulatory, and global issues all influencing the facets within the day-to-day operations of a care business. The sector, which delivers frontline service and care to people who can be at their most vulnerable, constitutes a vital part of the healthcare provision in the UK. It has been well documented that the UK has an aging population, with higher needs and earlier diagnosis of conditions leading to support. Alongside subsequent referrals, there is an increase in demand on providers. Christie & Co data suggests that, by 2034, 21 per cent of the population could be over 65 – equating to 16 million people.
Financing the sector When exploring funding, any operator or new entrant has to consider the noise that is in the sector, whether it be regulatory, economic, or political.
The interpretation of this noise will shape the key priorities, policies, and decisions a lender makes when considering funding across any sector; however, its impact is particularly pronounced within the care space.
At the time of writing, the issues within the CQC – as highlighted in the review conducted by Dr. Penny Dash – are already well known. In addition, we are now having to understand the implications of the new Budget regime, which includes an increase in Employer National Insurance contributions and lower band thresholds. Together, these changes are driving an approximate 10 per cent increase in the wage costs for care businesses. Research conducted by Christie & Co found that, in 2023/24, residential care fees increased by an average of 9.5 per cent, while nursing fees rose by 10 per cent. This
February 2025
www.thecarehomeenvironment.com
year, similar, if not greater, increases will be required to offset the Budget’s impact. This will play a significant role in lenders’ credit decisions. We are already observing a growing demand for our clients to produce detailed three-year forecasts for their businesses.
Existing operators Established operators will see opportunities in potential homes to improve them or increase their value. If this is to be the case, due diligence must be done. In most instances, clear financial forecasts and operational strategy will be essential for a
Established operators will see opportunities in potential homes to improve them or increase their value
successful lend. More so than ever, existing operators
need to be prepared to act on a potential acquisition. Although, in general, terms lenders will not provide a ‘blank cheque’, from our experience we are supporting clients with an assessment of their current business alongside any potential target, providing confidence to agents and sellers that offers are deliverable.
According to our market analysis, supply and demand is increasing, especially for small to medium-sized groups. Sixty three per cent of completions of care homes in the first half of 2024 were between the 20-59 beds – subsequently being sold to 30 per cent independent and 32 per cent small to medium-sized groups.
The supply of homes into the market
between 20-59 bedrooms has remained consistent; however, the demand from operators to acquire has increased by 11
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