The declining profitability of UK care homes
Profitability in the UK’s care home sector has been declining pretty consistently over the past 15 years. This trend has continued over the past four years – although not as dramatically as you might expect given cost increases – according to data collected by real estate consultancy Knight Frank.
This week Knight Frank released the 2023 edition of its UK Care Homes Trading Performance Review, which goes into considerable detail on the changes in fees and costs that care homes across the UK are facing.
The long term trend is that cost increases tend to consistently outpace fee growth. This has led to EBITDARM margins falling from 32% in FY 2008/9 to 25% in FY 2022/23.
This trend has continued in recent years. EBITDARM fell 1.3 percentage points in FY 2022/23, which is a significant drop. However, given that staff costs rose 8.44%, and several other costs rose by similarly high figures, Knight Frank says the 1.3 percentage point fall actually “signals how well the sector has absorbed inflationary pressures”.
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