An elderly adult at a care home is helped by a care home worker

Care crisis: The UK's care home financial crisis has been exacerbated by inflation

The COVID public inquiry has shown the UK Government’s decisions had a terrible impact on care homes.

In particular, Jenny Harries, current Head of the UK Health Security Agency, has been accused of failing to protect care home residents, when it emerged that, as England’s Deputy Chief Medical Officer, she suggested in March 2020 that COVID-infected patients be discharged from hospital to care homes if the NHS were not to be overwhelmed.

Such findings resound in a health care sector that is in deep trouble. In England, the vacancy rate in the adult social care workforce for 2022-23 was 9.9 per cent. That’s 152,000 nursing home care vacancies currently unfilled.

Experts underline that staffing and financing were problems in the UK care sector well before COVID arrived in March 2020. The pandemic exacerbated this crisis, despite the extra £2.1 billion in emergency Government support provided for board and care homes during the first year.

My colleagues and I published a report earlier this year focusing specifically on the financial impact the pandemic has had on care homes for older people in the UK. Very little of that financial support actually went into supporting staff. Of the care workers we spoke to, 42 per cent are in financial distress related to having worked in care homes during the pandemic.

Care homes themselves aren’t faring much better. Six in 10 of the UK’s care-home beds are operated by companies that could go bankrupt should they experience even a mild economic shock.

How bad is it for UK care workers?

Between October 2021 and April 2022, in collaboration with the Centre for Health and the Public Interest and colleagues at Warwick Business School and University College London, we surveyed 605 care home staff across the UK. We conducted in-depth qualitative interviews with 43 care home staff, including workers and managers.

We found that most of the £2.1 billion in Government aid went to covering care homes’ loss of revenue resulting from decreasing occupancy.

Before the pandemic, the occupancy rate in care home nursing facilities was 87 per cent on average with any drop below 80 per cent putting providers at risk of default. Between March 2020 and April 2021, COVID saw occupancy in the care home sector in the UK decline by eight percentage points to an average of 79 per cent – the lowest rates recorded since 2006.

Much of this is due to the high attrition rate among residents. Over 42,000 care home residents died from COVID-19 between March 2020 and April 2021. One survey respondent put it bluntly: “I worked for two solid weeks with just a nurse on a dementia [unit]. All 24 residents had COVID and half of them passed away within the two weeks.”

The workforce also suffered higher attrition rates. In the first two years of the pandemic, 1,290 care workers (including those working in domiciliary settings) died as a result of COVID-19.

Severe staff shortages and community health teams suspending their care home visits meant remaining staff had to undertake tasks beyond their remit, for which they were sometimes unqualified. Half of those we interviewed thought their ability to meet residents’ needs was reduced.

Within residential elderly care homes specifically, in the UK, staff vacancy rates in January 2022 reached 11 per cent, a five percentage point increase from April 2021. Combined with staff illness and additional responsibilities, this led to workloads increasing to levels our interviewees described as “intolerable”.

Of the care workers we surveyed, 80 per cent reported working more hours during the pandemic, typically doing 12-hour shifts, as opposed to the seven to eight-hour norm.

Despite these traumatic working conditions, staff reported getting little support. That same care worker told us they had “no cover, zero support from management or anyone else”.

Staff pay remained largely unchanged, except for a one-off bonus of £500 paid out for some workers. There were limited changes to sick pay. And overtime was paid at the regular rate. Taking on extra hours actually put some workers at a financial disadvantage because it reduced their eligibility for in-work benefits.

Care homes offer dire funding model

A 2019 report by the Centre for Health and the Public Interest thinktank cited the care home sector being “almost entirely provided by independent companies” as a root cause of its structural problems. It highlighted the demise, since 2011, of two major providers, Southern Cross and Four Seasons, which housed 45,000 elderly people between them.

Our findings confirm that the complex funding model on which the care home sector and its medical care for older adults is based is unsustainable. A financial analysis we conducted immediately before the pandemic (March 2020) showed that tight profit margins meant that even a relatively small five per cent decrease in revenue – or equivalent increase in costs – would have put those providers of assisted living facilities operating more than 60 per cent of all UK care home beds into serious financial difficulties.

We examined all publicly available financial data accounts of 4,013 care home companies across the UK, providing 377,856 beds and a level of care for people aged 65 and over, operating on for-profit and not-for-profit bases.

In total, the Government allocated £2.1 billion to the care home sector. The vast majority of this amount went to ensuring its financial viability.

However, we found that while receiving this Government support, 122 (27 per cent) of the 460 companies we analysed paid out a total of £120 million in dividends, despite increased costs (for infection control, staffing and PPE) and decreased income (due to lower occupancy rates).

This represents an 11 per cent (£11.7m) increase on the previous year. It shows an extraction of profit, especially by some large private providers, in the form of shareholder dividends, from a sector in distress.

For the most part, however, two things kept care homes afloat in the first year of the pandemic. The financial support from the UK Government and care workers working harder and for longer hours, helping the elderly with various medical conditions and mental health problems while also assisting family members with a range of care options and medical services.

Government support was terminated in March 2022. The care home financial crisis continues, exacerbated by inflation

One finance director of a small non-profit care home told us their annual spend on agency staff has gone from £400,000 a year to more than £3.2 million in 2022. A senior manager in another non-profit concurred: “Our vacancy rates are much higher than they’ve ever been. Our [staff] turnover rate has gone up to about 33 per cent, and we had it down at about 18 per cent before the pandemic.”

Care workers cite exhaustion, disillusionment, illness and more as reasons for quitting. Care homes have been chronically understaffed for two years, asking more of their remaining staff than they should.

The consequences for the wider population are dire. As one manager told us, the struggle to fill nursing posts – despite what he deemed a “good” starting hourly fee of £21 – means that his small for-profit care home would probably cease offering nursing care. When care homes are at risk of collapse, or unable to fulfil their key tasks elderly people will not receive the services that they urgently need.

This article is republished from The Conversation.

Further reading:

Why is there a shortage of care home workers in the UK?

UK care home sector bailed out but burned out after COVID-19 pandemic

Bailed out and burned out? The financial impact of COVID-19 on UK care homes for older people and their workforce


Marianna Fotaki is Professor of Business Ethics and teaches Organisational Behaviour on the Full-time MBA. She also lectures on Management, Organisation and Society on the Undergraduate programme.

Derya Ozdemir Kaya is a Lecturer in Work and Organisation at the University of Sussex.

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