UK private care home profit margins soared during pandemic, study finds | Social Protection

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The UK’s biggest care home chains have seen profit margins jump by an average of 18% during the pandemic, new research shows, while the salary of the highest-paid manager jumped to £2.3million sterling.

Amid a social care staffing crisis and warnings from medical leaders that the system is “deeply flawed” and in need of urgent reform, an analysis seen by the Observer lays bare the financial successes of leading providers of care for the elderly and disabled.

The research – conducted by the Center for the Understanding of Sustainable Prosperity at the University of Surrey and Trinava Consulting with trade union Unison – found that six of the 10 largest adult social care providers for which data was available saw their Underlying profit margins widen between 2019 and 2020. , the first year of the pandemic.

The biggest increase was at Runwood Homes, where the underlying profit margin widened by 37% in 2020, and which recorded a pre-tax profit of £25.4m, up from £15m sterling the previous year, according to the research. A quarter of its homes are considered in need of improvement by the Care Quality Commission.

The highest margin – 41.7% – was recorded at Avery Healthcare, up from 39.8% in 2019 and 32.5% in 2015. The company, which runs 56 retirement homes in the UK, was recently acquired by the Reuben Brothers, named Britain’s second richest family. with an estimated fortune of £21.5bn, in the company’s first investment in the aged care sector. A press release issued in March said the deal – a joint venture with US real estate investment fund Welltower Inc – was “to generate significant opportunities for future growth”.

The findings will fuel concerns about private provider profits despite Covid pressures, and come amid reports of cost-cutting at some chains and continued low wages for many employees.

Vivek Kotecha, public policy consultant and director of Trinava, who carried out the analysis, said: “During the pandemic, there was a sense of national solidarity and sacrifice that was needed. I think people will be surprised that some companies actually seem to have done very well in coming out of the pandemic. »

He added: “What this shows is that these companies have high expectations of maintaining profitability, and workers and residents are feeling the brunt of that pressure.”

As well as widening profit margins, some providers have also raised the salaries of their senior managers during the pandemic, despite pressures from Covid and the staffing crisis in social services, the research found.

Runwood’s multi-millionaire owner Gordon Sanders received an additional £2m in dividends in 2020, taking £3m that year from £1m in 2019. The company accepted £2m taxpayer-funded furlough pay and Covid grants over the same period, according to Companies House records.

The highest paid manager of any provider, at Barchester Healthcare, was paid £2.27m in 2020, up from £2.02m in 2019 and £699,000 in 2015. Barchester, which is owned by Jersey-based Grove Limited, were advertised last week for £9.90 an hour, just above minimum wage.

The results come amid warnings that the welfare sector is in crisis. The British Medical Association warned in June of a “ticking time bomb” and said years of chronic underfunding, severe staff shortages and a growing elderly population meant that many people in the future, in especially the poorest, would not receive the care they need. “This situation has been exacerbated by the pandemic, and government proposals to shape the future of social protection fall far short of what is needed,” he said.

Last month, a report by Unison highlighted the growing role of private equity in the sector, finding that more than one in nine care beds (12%) in the UK were now in the hands of private equity firms. ‘investment. He also revealed cost reductions at several unnamed companies, including claims that food and cleaning supplies would be replaced with cheaper substitutes and residents’ meals would be reduced from three to two a day.

Christina McAnea, General Secretary of Unison, said: “The sector is on its knees, staff are leaving in droves and those dependent on care are getting a windfall. Yet many care home owners continue to see their financial fortunes soar amid this crisis. Thorough reform is now needed with the profit being taken from social care.

Avery Healthcare and Runwood Homes declined to comment.

Barchester Healthcare said it invests in nursing homes and staff receive regular pay rises and loyalty bonuses. “Over the six years from 2015 to 2020 inclusive, we have invested a total of around £56 million in capital expenditure on property and improving our services, to ensure residents live and staff to work in the best possible conditions,” he said. He added that the £2.3million figure shown in the company’s accounts for the highest paid director included a “one-time payment linked to a long-term incentive plan”, and not only salary.

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