According to the latest research from accounting firm, Wilkins Kennedy, 51 care homes entered insolvency in 2013, compared to 67 in 2012. The drop of 24% is largely due to expensive, high-interest loans having reached completion and in turn freeing up extra cash for companies.
Many care homes took out large loans prior to the financial crisis of 2008 and have since been tied down with debt. Some companies also used interest rate swaps to avoid the high interest rates, however were unable to benefit from rates when they were low.
Partner at Wilkins Kennedy, Stephan Grant, commented, “Many of the care homes that struggled through the financial crisis have now disappeared, with the overall financial health of the sector slowly improving as a result.”
“However, even though the initial impact of the local authority cuts now seem to have been absorbed, some care home businesses might need to brace themselves for further pain in this area as local authorities face another squeeze in their spending power for 2014-15.”
A recent survey by Company Watch revealed 1,185 care homes are still at risk of insolvency in the UK. If interest rates rise soon, many companies may need to consider restructures and possible turnaround solutions, like a CVA.
If your company is struggling and you would like someone to talk through your options, contact us on 0800 9700539 and speak to one of our corporate advisors.