Market analysis


The financial impact of Covid on care homes and retirement living


Ben Barbanel, head of debt finance at care home lender OakNorth Bank, takes a look at the implications of Covid-19 on the care home and retirement living market and explains why these sectors cannot be overlooked, undervalued or taken for granted


The UK’s social care industry is one of the biggest and most important in the UK. There are more than 1.5m people working for organisations that provide social care and support services to people all over the country, contributing an estimated £43 billion to the economy.1


In England alone, the


sector has created over 17,000 organisations and seen the development of just under 40,000 physical sites across the country.2 Elderly care and retirement living are important sub-sectors of social care - according to the Office for National Statistics, one in four people in the UK will be 65 or over by 2050.3


This, coupled with


higher living and healthcare standards is resulting in a greater life expectancy, which in turn, is amplifying the need for more elderly care in the future.


The importance of specialist care With more people in the UK being diagnosed with dementia, the need for specialist care is essential. The disease is an ever-growing challenge for the both the NHS and specialist care home operators, with the illness now being universally seen as one of the most critical health and care issues faced not only in the UK, but the world.


Dementia is one of the main causes of later life disability, ahead of cancer, cardiovascular disease and stroke, with the UK currently seeing 850,000 people being diagnosed, a figure that is projected to increase to 1.6m by 2040.4


42


is a considerable economic cost associated with the disease - £23 billion a year - which is predicted to triple by 2040,5


and equate to


more than the cost of treating cancer, heart disease and stroke patients. The need for specialist care homes in the UK is increasing and additional investment in growth is required to meet current and future demand. We have done quite a bit in this space recently; for example, we completed a £26.3m loan to real estate investment manager Frogmore to help them develop a 35-bedroom specialist dementia care home situated in the City of Westminster. We have also supported Care Concern Group with an £18.5m facility to develop a new 81-bedroom care home in Aberdeen specialising in dementia care and providing facilities such as hair salons, cinema rooms and a library.


As a result, there


The aftershock of the pandemic will likely be felt by care home and retirement village operators for years to come


The impact of the global pandemic Pre-pandemic, we were seeing a healthy amount of growth in the sector. As a lender, we had, and continue to have, strong confidence in the sector, but it is clear the impact of Covid-19 on care homes has been dramatic and long-lasting. The UK has experienced a devastating number of deaths among care home residents, which unfortunately brought long- standing problems with care home provision to the forefront of the general public’s minds. HC-One, the UK’s largest care home


provider recently revealed that the pandemic claimed more than 2,000 of its frail and elderly residents, with the industry being far from in the clear still to this day. According to the Financial Times, 43 of HC-One’s 326 homes were still in a state of lockdown and closed to new residents as of late September 2021, with occupancy rates remaining at least ten per cent below pre- pandemic levels.6


Furthermore, according to a report in July from Christie & Co, 39 per cent of care home operators said occupancy levels were below 80 per cent,7


in the long-term. Compounding these challenges is the fact that the furlough scheme ended on 30 September – a scheme


www.thecarehomeenvironment.com January 2022


which is not sustainable


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