The UK’s care home industry is one of the fastest growing in the British economy. Demand for places in residential facilities continues to soar as an ageing population, as well as a range of other factors, puts pressure on the sector. This represents both a challenge and an opportunity for those in the construction industry. In this whitepaper we’ll look at the current state of the care home sector in the UK, as well as the key challenges that exist and how difficulties are being overcome.
We’ll also examine the way that the construction sector is responding to changes in the need for care home provision and how it is already contributing to ongoing care home growth. Given the vast expansion in this industry, which is one that requires considerable brick and mortar investment, it’s a sector that is worth closer examination by any construction business.
Care home occupancy at record levels
At the end of 2018 reports began to emerge of the demand for care home places hitting unprecedented highs. Occupancy levels were at 89.4%, a figure not seen before. This was thought to be the result of an impressive six years of growth in demand but also a reduction in existing facilities. Some 267 homes and 6,028 beds were lost during the first half of 2018. As a result, the situation was described as “desperate,” in particular given the UK’s ageing population.
Not only that but more homes have been slated for closure and it’s thought that over the next five years a further 6,500 care homes are at risk of being shut down. This would mean that around 140,000 beds would be lost. According to property specialists, care home closures are being driven by falling standards as well as rising costs and property stock that is simply too old.
The pressure of an ageing population
Statistics from the Office for National Statistics indicate just how much of an issue the ageing population is for the UK. Its figures show that in 50 years time there will be another 8.6 million people aged 65 years and over. That equates to a population roughly the size of London who will have mostly moved out of the workforce and into retirement, potentially requiring care home support as a result. That means that, by 2041, the total number of people in the UK over 65 will be 20.4 million, making up 26% of the total population. This is in contrast to the figures for 2016 when there were 11.8 million UK residents aged 65 years and over, making up 18% of the total population.
There are two primary reasons that the Office for National Statistics identifies for the ageing population in the UK:
- People are living longer. As a result of improved living standards and medical technology life expectancies are now much longer.
- The way we have families has changed. Today, fewer people are having children and many people have families later in life. As a result, the youthful end of the population has shrunk.
Current state of the UK care home sector
In the UK there are now some 20,000 care homes, nursing homes and residential homes that are the first port of call for adult and elderly care around the country. Demand is set to increase steadily and the worrying predictions about care home closures have left many wondering how the sector will cope. Currently, the market is renowned for being a fragmented one with multiple small providers across the sector. Care homes in the UK are managed by independent, private enterprises, as well as by charities and voluntary organisations.
There is also a significant chunk of the industry that comes under the management of the NHS or local authorities. Currently, around 80% of providers in the care home sector have just one facility – this is a situation that is creating significant fragility with respect to survival of these businesses. By 2020 it’s thought that roughly 6,700 new places will be required every year in order to keep up with public need. Although development is already under way the question is whether this is likely to be enough.
What challenges exist for the sector right now?
Issues with cutbacks and government funding
For those care homes that are in the remit of public networks and organisations, such as the NHS, there have been serious issues with cuts to funding over the past decade. Many have seen their resources dwindle as the money necessary to fund upgrades and expansion has just dried up.
Overcoming quality perceptions
Issues of quality have plagued the care home sector in recent years. When this has reached the mainstream media it has been with respect to quality of care. However, the sector also faces a serious issue in terms of the existing care home stock that is available. Much of this is considered to be substandard and many current homes just don’t have the resources to cope, either with the rising demand or the increasing complexity of residents’ needs.
Low numbers of available sites
One of the major obstacles to development in the care home sector has been the lack of availability of suitable sites on which new facilities can be built. Competition for construction sites is fierce and many potential care home locations have been snapped up by residential developers. As a result, the volume of available appropriate locations on which care homes could be constructed has been significantly reduced.
Issues with the market
Small investments have led to a very fragmented market in which large numbers of providers are responsible for just a single care home. This has not created resilience within the sector and means that many existing business could potentially be very vulnerable to collapse.
The issue of an ageing population
This is probably the biggest challenge for the care home sector today – coping with the pressure that an ageing population is putting on an already strained industry. Figures such as those from the Office for National Statistics show just how much more of a need there is for care home sector expansion than there has ever been before. Although there is the potential for profit within the sector, currently there simply aren’t enough providers with sufficient brick and mortar locations to meet the demand that this top heavy population is creating.
Consumer choices
A recent Competition and Markets Authority study also identified that, alongside a lack of stock, the sector was also falling down in terms of enabling consumer choices. This was particularly with respect to the necessity of providing more support for consumers when it comes to finding the right care home. The report also identified that there was insufficient protection for people who were already living in care homes. Given that the number of consumers requiring access to facilities like this is going to increase substantially in the near future the issues that the Competition and Markets Authority identified are only going to get worse.
How is the UK care home sector already responding to these issues?
Finding ways to future proof care home businesses
There are some key issues that are going to create future problems for care home operators. Among these is the fact that so many providers have just one care home and that makes them very vulnerable to rising costs and changing market conditions. Another issue is that some care homes are reliant on having a large number of state funded residents but this income stream is reducing significantly. As a result, many providers are currently trying to find ways to future proof income, diversifying residents and looking to attract those who are self-funded.
Creative thinking around available sites
As already identified, the lack of potential sites has proven to be a big problem for care home expansion in the UK. As a result, some are already looking to take a more creative approach to this issue. That may mean not opting to build brand new on available sites but to repurpose existing stock. For example there are many opportunities now arising for the purchase of 1980s and 1990s purpose built homes at much more realistic prices. These properties could be inexpensively converted into new facilities without the same costs involved in building from scratch.
Expansion in the private sector
It is largely the private sector of the care homes industry in the UK that is responding to the challenges that the market faces. Currently, independent care homes account for around 95% of facilities. It’s here that there is the most potential for expansion to cater to the increasing demand for care home places. There is already a lot of activity and new private homes are being built all the time in order to try to respond to growing need.
Raising standards across the board
Perceptions of quality have been very problematic and the industry has responded by looking to raise standards, both in terms of the stock that is available and also the practices and systems that are used to ensure that care homes are run both compassionately and efficiently.
What does the sector need from construction businesses?
As much of the potential for development lies in the private care home sector there are many opportunities for construction businesses looking to expand. Where this is a goal it’s crucial to understand what the UK care home sector currently needs in terms of responses from construction enterprises.
Raising standards across the sector
Much of the UK’s existing care home stock is severely out of date. This is not just with respect to the buildings but also the facilities that they are able to provide. For example, few have the resources to deal with the rise in the number of residents with dementia and the different practical changes this necessitates in care homes. The UK care home sector clearly requires support in raising standards and helping to overcome negative perceptions of quality. Smart construction has the potential to help improve conditions in the care home sector by designing efficient buildings that help to deliver operational savings and which cater to specific sector need.
Adapting with custom design
Intuitively designed buildings that are equipped to cope with the challenges that modern care homes face, from cost pressure through to the need for specific illness care, can make a big difference to the way that the care home sector is able to respond to the issues it currently faces.
Responding to demographic pressures
The UK’s aging population means that there is a desperate need for care home buildings that are economically designed and specific to the requirements of the industry – and this is only likely to increase. Those businesses that are able to offer cost effective plans for building and development that enable care home operators to respond to the demographic pressures they face can tap into the opportunities that exist for real business growth.
Looking at specific geographic need
Care home need differs across the UK and currently there are some places where this is much higher. For example, this is often the case in urban locations with larger populations and in wealthier areas that are popular with retirees. By identifying those locations where there is currently a lack of sector provision, there the construction sector can continue to respond to the crisis and grow into this market to help to meet need.
What is the construction sector already doing to contribute to care home growth?
The construction industry has a key role to play in supporting the care home sector as it responds to the challenges it currently faces. Construction businesses are already stepping up in three key ways.
1. Looking into other options to help cope with the specific needs of an aging population.
Many of the statistics that surround the discussion on care homes focus on an ageing population, all of whom will at some point be seeking care home places. However, it’s worth noting that this won’t appeal to everyone. There is significant scope for different types of development – aimed at older demographics – that could be constructed to cater to the needs of an older population and take the pressure off the care home industry as a result. For example, construction is already under way on sheltered housing developments and projects that are aimed at retirees. These developments are intuitively designed for the needs of those over 65 but allow for a measure of independence that could help to reduce care home demand.
2. Enabling care home providers to fulfil expansion plans
The construction sector has a big role to play in terms of providing the physical resources that are necessary for care home businesses to grow. This includes supporting many enterprises that are looking to expand into this market, such as Frontier Estates, which announced plans earlier this year to build four new premium retirement homes as part of its expansion into the profitable care market. According to the medical journal The Lancet the predicted shortfall in terms of beds is likely to be around 28,000 by 2025. That’s unless an extra 7,000 care home places can be created over the next six years. Innovation and resources within the construction sector are already being directed towards making this happen and will be crucial in the years to come.
3. Supporting the growth of the private sector
Currently, around 95% of UK care homes are run by private operators and it’s in this part of the sector where growth has the most potential. Bed shortages in the public sector are only likely to get worse as public funding is reduced and budget cuts mean resources dwindle. Private sector operators, in partnership with developers, have the potential to create a robust response to the need for new care home places. Being able to identify the right sites in the right locations across the UK will be key, as will the timely management of projects to ensure that the private sector is able to expand at a rate that will enable it to meet demand. Partnerships such as this are already in existence and will be key to care home sector development in years to come.
The UK’s ageing population has put enormous pressure on UK care homes and could make it difficult for supply to meet demand in the future. This represents significant opportunity for the construction sector and any enterprises that are looking to expand into this burgeoning market. UK construction businesses are also in a prime position to help the sector develop in response to need so that, in future, all those who require care home places can be catered for.
At RG Group we are always looking for opportunities to support those in the construction sector to thrive. Get in touch to find out how we could help with your construction project.
