It is predicted the care sector will suffer once the National Living Wage increase comes into force in April next year. Costs are expected to rise £900 million, according to research from financial health specialists, Company Watch.
Around 1,400 care homes could be at risk of failing as the gap in funding escalates, making it difficult for businesses to pay their staff.
In the Autumn Statement last week, Osborne announced a rise in council tax could help councils fund social care, however it’s unclear to what extent.
The last few years have been a difficult time for large care businesses, like Southern Cross and Four Seasons. This extra burden will only add to the problems in the industry.
Care homes that are already struggling should look into turnaround options like the company voluntary arrangement (CVA) or consider securing alternative finance. A CVA can allow a proportion of debt to be repaid to creditors over several years, giving some much needed breathing space while directors can continue running the business.