Staff costs in UK’s care homes are at all-time high according to a new report, says Gary Chown, Director, Commercial Banking, NatWest Bank


A surprise increase in the use of agency staff within the UK’s care homes has resulted in nursing home staff costs equating to 55% of turnover, according to NatWest’s Care Home Benchmarking Report. This major cost is felt by over half the nursing homes, where it would be expected due to the shortage of nurses. However the report highlights that the rise in agency staff usage is also apparent in residential homes, with 41% of those surveyed using this service, and as a consequence financial results across the entire sector are being negatively affected.

The report analysed data from 156 care homes, including both SME and Corporate providers, and provides a geographic breakdown to allow for regional comparisons and to make it easy for care home owners to benchmark their own business.

The difference in fee rates in care homes throughout the UK is becoming more apparent also. With the majority of residents in Northern Ireland and North of England paid for by the local authority, the average fee rates in these regions are amongst the UK’s lowest. The average fee among residential homes is £597 and among nursing homes it increases to £730 per week.

NatWest’s ‘Care Home Benchmarking Report’ for the first time includes children’s homes which represent a small but important part of the care home sector. Again, the main cost is staff which represents 56% of turnover. This cost is also reflective in the high fee rates of £3,631 which are unfortunately associated with this highly vulnerable group. Locality remains an issue for children’s homes as 55% of children are placed more than 20 miles away from their family home where on average they stay for 2 and a half years.

In producing this report, which for the first time includes Northern Ireland and children’s homes, we have identified a number of norms. This helps us provide further support to our customers through being able to question any outliers to these norms that they may be experiencing. We are proud to support this important, and growing, sector and I was enthused to see that the majority of operators we visited were extremely optimistic about what the future holds.

NatWest has vast experience in helping care home providers develop their businesses across the United Kingdom and know what good care looks like.

London And The South-East

Nursing & Residential Homes

Care homes in London and the South East are the most modest-sized in England, with an average of 31 and 38 registrations in residential and nursing homes respectively. In a highly urbanised area of the country, that has high population density and keen demand for residential building land, it is not surprising there are fewer larger homes. These homes also have comparatively fewer en-suites than most other regions. Given the pressure on service provision, the area also has the highest usage of agency staff, with 59% of residential and 67% of nursing homes using this type of staffing. Average spend among nursing homes is significantly higher than the average figure for England.

Food cost per bed is marginally higher among nursing homes, with residential homes the same as national averages. As expected, maintenance costs are higher than most areas. Both types of homes have high occupancy levels, possibly reflecting an undersupply of beds across the region. The make up of occupants in the homes, was 50/50 local authorities and private. We had expected the fee rates to be higher than other regions, however they are broadly similar. Altogether, staff, agency, food, heat, lighting and maintenance account for the majority of costs. Against turnover it would indicate this region to be one of the more profitable to operate, which is reflected by the views of owners.

Sentiment among owners concerning future trading conditions nearly match those of England as a whole. A quarter of residential home owners think conditions will improve, while two thirds think they will remain stable over the coming year. In nursing homes, the view was more optimistic, with nearly half of owners predicting an upturn and a further half seeing stable conditions.

Specialist care homes

Homes that provide specialist care in this area are among some of the best-rated in England, with 90% receiving good inspection results. Average fees are high, although occupancy levels are at 90%, which may have been influenced by new units still being filled. Agency use stands at 70%, which is well above the national average, yet spend on agency fees averages at £23k, beneath the national average of £28k per year. Staff costs are the highest in England, although these are offset by lower energy and food costs.

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