Thoughts of our CEO on the Financial Pressures re-shaping the Care Home Sector – published in care Home Professional on March 27th 2025

The UK care home sector is at a pivotal point, with unprecedented financial pressures forcing providers to re-think the way services are provided. In this exclusive guest column, Bethan Evans, CEO of My Choice Healthcare, discusses cost pressures and solutions.

Rising costs, staff tensions and funding shortfalls are forcing providers to make tough decisions, with potentially far-reaching consequences for residents, families and local communities.

If not addressed, this could result in fewer beds available, closures and a reduction in the quality of care available to those most in need.

Increasing operational costs

Perhaps the most immediate issue is the shocking escalation of operating expenses.

Utility bills alone have risen, with certain care providers reporting hikes of as much as 500 per cent, putting a major squeeze on budgets that were already under strain.

Increases in food and insurance costs, along with the expense of medical supplies have also added to financial pressures, with the books growing ever harder to balance.

Workforce issues

Workforce issues are another major obstacle. Care workers are the lifeblood of the sector, but recruitment and staff retention have been longstanding problems for many in the sector.

The sector has traditionally had low pay relative to the work carried out by staff. The gap between the National Living Wage and the typical pay of a care worker has narrowed, and it has become more difficult for providers to offer competitive pay.

Trained staff are transferring to other employment where remuneration is higher and working conditions might be perceived as less demanding. A recent survey found that 95 per cent of providers believe increasing pay would have the most impact on boosting numbers of staff. But with financial concerns mounting, increasing salaries on a blanket scale is a battle uphill.

Service reductions and market withdrawals

The pressures have already led to service reductions across the sector. Around 43 per cent of providers have had no option but to close parts of their operations or hand contracts back to local councils as their finances have grown unsustainable.

It is even more of an issue for smaller providers, with half of those said to be considering leaving the market altogether. This is a concerning trend, as it means less options for families that wish to offer high-quality care for their loved ones and a further burden on an already stretched healthcare system.

Funding shortfalls

Funding remains an issue. While efforts have been made to increase financial support, providers report that fee increases by local authorities are not keeping pace with inflation.

Last year, council tax rate rises failed to match the 9.7 per cent rise in the National Living Wage, and many care homes are struggling to support even the most basic running costs.

The funding-cost gap is putting huge pressure on providers, many of whom are having to make the choice as to whether to cut back services, slim down staff or shut up shop.

The path to sustainability

There are solutions that could help stabilise things and provide long-term sustainability as well as address issues within the sector.

An initial priority would be to implement a funding system which allows a sustainable fund and makes provision for paying for good quality care.

There should be assurances for providers that funding will be adequate and ongoing so they can better plan ahead into the future.

Policymakers will need to collaborate closely with providers in order to fix these financial issues and create a long-term strategy that will help residents receive care that they value and deserve.

Investing in the workforce

Workforce investment is another important factor. Care workers must be valued as key workers, with packages that reward them for the crucial work they do.

Along with pay increases, career development prospects and improved terms and conditions of employment must take priority to make the profession more attractive to future candidates.

Without a stable and well-supported workforce, the standard of care will continue to decline, contributing further to the issues the industry currently faces.

Innovation and efficiency

Innovation and efficiency also need to come further into play. Technology can be utilised to make processes more efficient, reduce costs and improve delivery of services.

From digital care planning systems to the use of AI for admin, there are a number of ways technology can relieve pressures on budgets without compromising on quality of care.

Collaboration among providers, the local government and healthcare organisations can also help create shared resources and best practices that serve the industry as a whole.

The need for action now

The issues facing the care home industry are daunting but not insurmountable.

Current financial pressures require immediate action by policymakers, providers and stakeholders to ensure the long-term sustainability of services.

If nothing is done, the threat of mass closures and service cuts will increase further, depriving vulnerable people of the care that they need.

The time for change is now, to protect the future of care homes and those who depend on them.

Originally published on Care Home Professional: https://www.carehomeprofessional.com/balancing-the-books-the-financial-pressures-reshaping-the-care-home-sector/