By stewartb
As certain care home owners continue to seek media profile for complaints against government, notably in Scotland but indeed elsewhere in the UK, it seems appropriate for the TuSC to continue to provide information on the nature of this commercial industry.
Despite ‘complaint’, the care home market in the UK still seems to be attractive to private sector investors. When looking at the longer term fundamentals of market demand and supply, it is probably not surprising!
According to specialist advisor One Touch Investment (OTI) : “the UK has an ageing population; care for the elderly already generates an income in excess of £14.5 billion for the UK economy every year, the majority being funded by the government.” (with my emphasis)
Source: https://www.onetouchinvestment.co.uk/news/care-home-investment/uk-care-home-market-worth-investing/
OTI sets out evidence on projected long term, sustained increase in demand for care homes in the UK. It explains how government is (arguably, has to be at least to a degree) committed to finance the care of those without financial assets. So we have a ‘market’ with increasing demand for critical services and a ‘public’ buyer with little choice but to pay to meet the demand: the commercial attraction becomes clear!
The same source provides this as further background: “The National Health Service in the UK has been reducing capital and seeking out private partners to develop and manage care homes. Virgin Care entered the market in 2010, and over the past six years has been awarded contracts worth more than £1billion and runs over 200 NHS services. So private companies are developing and managing the care homes. The government will pay the bills – where the people can’t afford to.”
(For some indication of Virgin Care’s share of the health and social care market in England see: https://virgincare.co.uk/services/ )
We are also told by OTI that: ‘High yielding, hands off investments like care homes and student accommodation investments have been very popular with overseas investors because they are fully-managed and pay regular income’ says investment director, Arran Kerkvliet, at One Touch Property; a specialist property broker in London that sources well-researched property developments for global investors seeking to diversify their income.’
Of course all parties to these care home investments – underpinned by the safety net of government paying residents’ bills – will be extracting value for their own benefit. And the value created is not only being extracted by UK residents but extracted often by overseas interests.
‘Helpfully’ the potential investor is alerted by OTI to the ‘risks’ in care home investment: “Nursing care, qualified nurse shortage. Inflation and minimum wages driving costs up. This is why those leases are only 8%Net.” Those bothersome minimum wages …!
Care home investments are now being viewed as an alternative to serviced apartments and holiday lets for individual investors. As OTI explains: “… AirBnB profits have plummeted significantly due to the Coronavirus pandemic leaving people unable to travel. Investors were previously attracted to the idea of serviced apartment investments due to the high yields they offer. Short term stays are able to command higher daily rental fees and this converts into higher rental yields. Although as we have seen, they are not immune to the change in the economic and daily landscape of the UK.”
“One alternative where the fundamentals are not affected by outbreaks or economic downturns are care home investments. The ageing population in the UK creates an underlying need for care home beds, and the government’s failure to provide an adequate supply means that there is a sustained demand for investors to plug the gap.” So in effect UK government policy has been creating an attractive commercial market which permits value extraction including by rentiers, and including ones based outside the UK!
And finally for now: “These (this class of care home investments) work similarly to serviced apartment investments in that they are classed as commercial property so no stamp duty is applicable under £150,000. They are generally bought on a 25-year commercial lease where a yearly return is underwritten in the contract. We (OTI) source care homes that are fully operational and have been successfully operating for years. We analyse the financials to decide whether the returns stack up. Often guests are self-funded although if they do not have enough capital to fund their stay then the government supports them, allowing for a constant rental income and occupancy.” Or to put this another way, the taxpayer via government mitigates the investors’ financial risk!
There must surely be better ways than this to look after the elderly and vulnerable! Of course we should expect commercial care home interests to marshall resources to resist change.
Talking-up Scotland 'Albatraz' 
https://socialistworker.co.uk/art/41916/Billions+made+from+care+home+crisis
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You are right to keep putting out information on this sector.
It is clear that the unionist parties and their supporters in the Scottish trade union movement, and the media, see this as a potent line of attack on the SG.
While we tend to see this as a Tory ‘thing’, under Blair and Broon substantial privatisation legislation was passed and several Blairites have significant investments and holdings in privatised health care, so, this explains part of Labour’s stance. Its main stance is, of course, hatred of the SNP.
The care home sector is substantially staffed by women, who work unsociable hours for low pay. Given the perfidy of the Scottish Labour and trade union movement with regard to female employees of Glasgow City Council, I would hope that the women – who deserve a huge wage rise, substantial improvements in conditions, and our grateful thanks for the kindness they show – remember how Labour and the trade unions colluded to deprive them of equal pay for more than a decade.
Greater public oversight of the sector, plus improvements in pay and conditions for employees ought to make the rentiers who leech on this sector ‘reconsider’ their ‘investment’, so that the sector can be returned to public control fairly cheaply.
PS Your link to the Socialist Worker article could just as well link to the Morning Star – except for the Scottish editor. While the Star articles covering other parts of the UK reflect your and the SW positions, the Scottish editor allies himself with the unionists (particularly Labour and the TU movement) but it quotes the statements from the Care Home owners, with scant information about whom they are.
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Thanks for the alert on the Scottish Editor.
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Excellent points about legislation to improve standards and working conditions. For example, should there not be extra pay for unsocial hours, working weekends and statutary holidays? Plus adequate holiday leave and sickpay?
Any owners in breach of hygiene regulations, for example, should remedy this within the period allowed or face a severe fine. A subsequent breach should mean they lose their licence.
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