Market overview
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This specialist care publication provides a comprehensive view of all forms of adult social care across residential and non-residential settings, encompassing services for adults with a physical or learning disability, physical or mental illness, substance misuse or acquired brain injuries. Care is typically commissioned by local authorities from independent providers, the vast majority of which is long-term support within a home (‘care at home’) or residential setting (‘care home’).
The market is occupied by a vast number of independent providers, with 75% of providers operating just a single care home
The volume and disparate needs of individuals requiring specialist care generates a market landscape in which a large number of highly varied companies operate, with over 14,800 independent providers across 25,800 locations in March 2020¹. According to LaingBuisson, the top ten largest care home providers account for just 16%² of the market, based on revenue. The market is occupied by a vast number of independent providers, with 75% of providers operating just a single care home, making up 38% of total beds². Similar characteristics are true of care at home providers, with 90% operating from one location³.
In recent years, independent providers have found it harder to keep pace with the changing environment, a trend accentuated through COVID-19. Several factors have driven consolidation in the market, including:
- High occupancy from excess demand, restricting or subduing organic growth
- A highly fragmented market
- Increased specialisms
- Employee retention and recruitment challenges, including wage inflation, loss of staff due to Brexit and the pandemic, and the impact of vaccination status on staffing
- Working policies
- Access to operational synergies
- Pursuit of geographic expansion
- Onerous regulatory environment, with larger operators possessing more resources to overcome challenges
- Technological advancements, unlocking operational efficiencies (e.g. workforce management, compliance, electronic care management systems) to improve margins and care quality
- Requirement for full ‘one stop’ solution care pathways
The long-term nature of placements, secured government funding and a lack of beds underpin the market’s strong fundamentals
The long-term nature of placements, secured government funding and a lack of beds underpin the market’s strong fundamentals. Coupled with consolidation opportunities, the market has attracted an increasingly diverse investor base, even before COVID-19, including infrastructure funds, property funds, (with or without opco partner,) and private equity (PE). COVID-19 has served to further this, as investors have sought to capitalise on an increased demand for services and operational and financial pressures faced by smaller operators.
Key players in the UK market
Residential care and adult home care are key segments within the UK specialist care market. The top players in these respective segments are presented below.
Key UK residential care providers
Source: Data from each company’s latest published annual account
NB1: Achieve Together was formed through the merger of The Regard Group and the Care Management Group and includes revenue of its subsequent acquisition, Montana Healthcare
NB2: Sanctuary Housing Association revenue figure represents Care and Supported Living divisions only
NB3: Ramsay Healthcare announced in December 2021 it had reached an agreement to acquire Elysium
Key UK home care providers
Source: Data from each company’s latest published annual accounts
NB4: Active Care Group revenue excludes Huntercombe Group, with whom a merger was announced to have been legally confirmed in January 2022
Market sizing
the UK adult specialist care market was valued at £25.6bn in 2020/21, having increased in size
According to latest estimates from Skills for Care, the UK adult specialist care market was valued at £25.6bn⁴ in 2020/21, having increased in size as COVID-19 has required the provision of significant short-term funding help providers due to rising costs including PPE, cleaning, testing and insurance premiums, staff absences and a fall in care home occupancy from 90% before the pandemic to 80% by Feb 2021³. By March 2021, local authorities had received £4.55bn of unringfenced funding³. While in 2021-22, £1.1bn of ring-fenced funding had also been provided through the Infection Control Fund as well as an extra £270m to support COVID-19 testing³.
This funding has helped maintain stability in the sector during the pandemic, ensuring financial resilience among providers, as evidenced through a drop in voluntary care home closures from 482 in 2019 to 361 in 2020³. This has helped attract new investors, with the sector considered a defensible asset class.
Market sizing pre-COVID-19
In 2019/20, prior to COVID-19, total spend on local authority arranged care was £23.1bn
In 2019/20, prior to COVID-19, total spend on local authority arranged care was £23.1bn¹. This represented a fall in spending, in real terms, of 4% compared to 2010/11, contributing to a reduction in the number of adults receiving long-term support, having fallen from 873,000 in 2015/16 to 839,000 in 2019/20.
Of the spending on long-term care in 2019/20, physical disabilities (£6.3bn) and learning disabilities (£6.0bn) accounted for the largest proportions. £5.0bn (79%) of physical support was spent on adults aged 65 and over, whilst in contrast, only £0.7bn (12%) of learning disability spend related to this age group¹.
by 2038 the number of adults requiring care is projected to increase by 29% for those over 65
Based on pre-COVID-19 patterns, by 2038 the number of adults requiring care is projected to increase by 29% for those aged 18-24 years and by 57% for those over 65, compared to 2018 figures¹. This continued increase in the number of patients and complexity of needs requires further funding, with costs expected to rise by 90% for 18-64-year-olds (to £18.1bn) and by 106% for over 64-year-olds (to £37.7bn)¹, estimates which are only likely to have increased as a result of the pandemic.
Funding
Despite the historical and projected increases in demand for specialist care, central government funding cuts have exerted financial pressure on local authorities. Over the past decade, care costs have increased by £8.5bn, far outweighing the total funding increase of £2.4bn¹. Additionally, provision of available funding is allocated on a short-term basis, restricting long-term investment decisions and innovation.
COVID-19 has highlighted the need for reform to address a number of long-standing oversight issues
Oversight and reform
COVID-19 has highlighted the need for reform to address a number of longstanding oversight issues, including data limitations, visibility of funding flows and underinvestment in the workforce. Though new data collection legislation is likely to be passed to address existing data gaps and visibility issues, planned long-term reform in the sector has been delayed as attention has been focused on the COVID-19 response in the short-term.
Key reform recommendations
- Establishing a cross-government, multi-year funding vision for care
- Development of a workforce strategy, to aid recruitment, retention, and staff development
- Obtaining performance and cost data to assess system’s performance as a whole
- Considering how best to improve visibility of and transparency over providers’ financial sustainability and costs
