Julie Hopkins, Director and Head of Care Sector at Albert Goodman, Chartered Accountants and Financial Planners, gives her thoughts on the outlook for the care sector in 2018 and shares her top tips.

 

2018 has started off with increased interest in the care sector with the Albert Goodman Team assisting with sales, acquisitions, and forecasting. The middle residential market is holding its own with new entrants taking over from retiring/exiting owners or closed units, seeking to expand in the short to middle term.

Funding for the smaller care home, perceived as 25 beds and below, is more challenging, however, with the right asset, perhaps a mix of debt and equity and loan to value around 60%, transactions are happening.

What are the main challenges for the sector?

Staffing, recruiting and retention, wage cost pressures with National Living Wage and Auto Enrolment, stagnant Local Authority funding, aging property stock with insufficient funds for reinvestment, CQC increasing regulation.  There are indeed challenges to meet current needs, but a well led, invested Home and care in the community should rise to the challenges.

What will the summer’s Green Paper bring?

It will address the need for transformation in the health and social care sector, seeking sustainability of funding and workforce.

How will future care be paid for?

There are ongoing consultations as intelligence is collated for the Green Paper.  Some schools of thought point towards a ring-fenced care tax, whilst others see the future combination of income tax and national insurance as the time to increase the overall tax.  Others favour a form of insurance paid for from pension pots for the over 55s.  Councils will be announcing the 2018/19 Council Tax rates shortly and it is anticipated that many will set the care precept at 3%.  BUT will this reach funding for care, or will it just pay the increases in staff costs?

Research all points in one direction – as the population ages the sector must grow substantially, whether it is care in the community or the provision of care homes. The message to business is ‘plan ahead.’

How is Albert Goodman helping businesses to prepare?

We are looking at real-time management information, moving businesses onto cloud bookkeeping, looking and advising on forward cash flows, liquidity and solvency, and advising on a change of direction with current benchmarking.  Our Corporate Finance team, headed up by Neil Hutchings, assist with acquisitions and sales, carrying out due diligence and valuations where there is a change of business owner.  Property Capital Allowance reviews prior to extensions and selling are also successfully building up tax reliefs within a business, resulting in greater cash flow and saleability.

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