Threat of care home closures with rise in national living wage
The thought of one day growing up to an age where you could require full time care assistance does leave you contemplating on later life. A quick look at the UK’s demographic trends has shown that the over 65 population has been rising, with technology and extensive medical advances providing the ideal environment to live longer. And this is projected to continue.
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According to the latest statistics from Experian Economics, the over-65 population is forecast to rise from 11.6m to 12.9m by 2021. This statistic alone places the attention on the future provision and quality of social care facilities or in this case care homes which is likely to be demanded more than ever before.
This makes the development and investment into the sector very compelling, but given the existing systematic failures which are inherent in the sector, there are reasons to be equally frustrated. Over the last few years and most notably the last 12 months, the state of healthcare has been subject to much debate, with calls for the government to surgically correct the derisory condition of the sector.
The national living wage: The increase in the hourly wage rate for staff aged 25 and over to £7.20 has sparked uncertainty to a number of existing care homes; particular the ones that have found profit margins narrow as of late. However, as concluded in Knight Frank’s UK Healthcare Development Opportunities 2017 report, there was not a surge in care home closures in the period which followed 1st April. Yet, with the Chancellor’s recent autumn statement indicating a further rise of the NLW to £7.50 per hour from April 2017, there is the likelihood more care homes will close.
Brexit: The UK’s decision to start proceedings to exit the EU mid-way through the year came with shock and a sense of panic in the days which followed. The uncertainty to the UK economy will continue until a new agreement is crystallised which is some years away. The implication to the care home sector which in the large part is suffering from a chronic shortage of labour will be around its workforce, many of which are from EU nations.
However, with the significant disequilibrium in the supply and demand for care beds now well recognised, the extent to which Brexit and the National Living Wage will totally disrupt new entrants is questionable. The market has already seen some investors engage in new care home development schemes.
While there are notable headwinds which continue to dominate discussion within the sector, it must be acknowledged that events which took place in 2016 will have a long lasting impact to many other commercial property sectors.
Long-term demographic trends remains a key element and one that makes developing and investing in care homes even more of an astute business decision. For more information on which locations offer the best potential for care homes development please read our latest report.