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UK Care Homes A Growth Opportunity

The growth in the UK healthcare market is showing no signs of abating. The UK like many other western countries is seeing a growing ageing population thanks to enhancements in the quality of life provided by modern medical procedures. As such, an ageing population requires that its needs must be met.The UK healthcare market has followed the track of other global economies. In 2017 the market was valued at £10bn and was set to grow at 2.6% per annum until 2023. This growth can be attributed to the rise in NHS waiting times for several ailments which mainly affect the elderly and the ability and flexibility of GP referrals where, patients can opt for the desired time, date, and hospital/clinic for a consultation, which is creating vast opportunities for participants in the U.K. private healthcare sector.The growth in the healthcare sector has created a mini-boom in owner-operator care homes. Although historically seen as a dubious opportunity, the ongoing regulation of this sector by the Care Quality Commission has forced out less able operators, it has also forced larger participants to up their game or run the risk of running into public and political controversy. The main tenant for the UK Care Home sector is that the industry remains sustainable and it can fulfil the needs of the market by providing the correct level of care to those who need it.

Do we have enough homes?

As mentioned, the UK’s ageing population does not look like it will be slowing down. It has been reported by the Lancet that the UK will need an additional 71,000 more care home places in 8 years and that there will be an additional 335,000 more elderly people by 2025 who will have demanding needs. However, due to considerable financial pressure, the building of publicly funded care homes has declined. Over recent years spending cuts and pressure on budgets have meant that Local Authorities are unable to provide adequate services for an ageing population. This has, in turn, impacted an already stretched National Health Service.

Purpose built Care Homes

Historically central government would build care homes; however, these homes have always lacked investment and in the vast part are not fit for purpose in the modern era, especially when you consider the requirements set out by the Care Quality Commission. The need for purpose-built, fit for purpose care homes is of serious concern for the families of private residents, who need to ensure that their loved ones are adequately cared for. According to government figures in 10 years (2029), there will be a need for a further 200,000 beds. The fees payable for these private beds show a growth opportunity of 7% per annum. From this, we can conclude the private care home sector is on a trajectory of growth given a backdrop of inadequate existing facilities and budget pressure on local authorities.

Welcome environment to care home

UK will need an additional 71,000 more care home places in 8 years


Regulatory Environment

The CMA and Care Quality Commission have investigated the sector and highlighted the need to make the sector viable in the

long terms. Their recommendations have highlighted the opportunities available to care home operators. The recommendations have included increasing weekly fees with a 75%+ exposure to local authority funding without requiring a reduction in private fees. More importantly, they have recommended that local authorities plan for care homes in their own regions and to ensure there is enough capacity.

Activities and interests for all

Activities and interests for all

What does it take to be successful?

The post-war era elderly demographic has access to large disposal incomes and as such, they are willing to pay for superior nursing or residential care. To become a successful operator in the care home sector, future providers, must build a successful brand with a competent customer journey which should outline

  • The high quality of care a resident should expect.
  • Quality of facilities, including purpose-built facilities, ensuite rooms, couples rooms, and attractive landscaping.
  • Welcoming and warm environment for residents and their families.
  • Activities for all abilities and interests.
  • Communication and engagement with family members.

The result of offering access to purpose-built facilities allows private operators to charge a premium price of 30% or more than those in the public sector, however, the higher premiums need to be offset for staff wages and in particular meeting the demand for the minimum living wage. In spite of the additional costs and need for a satisfactory customer journey, the private care home sector has shown considerable investment over the last 5 years and offers substantial long term sustainable rental yields for infrastructure investors.

Azurian Capital’s Healthcare team can help facilitate the financing needs of care home providers, developers and operators. Our experience within the sector and knowledge of what it takes to succeed will hold future operators in good stead.