The UK’s biggest care home chains saw their profit margins rise by an average of 18% during the pandemic, new research shows, while the pay of the highest-paid director rose to 2.3 million pounds sterling.
Amid a social care staffing crisis and warnings from medical leaders that the system is “deeply flawed” and in urgent need of reform, analysis seen by the Observer lays bare the financial successes of the main providers looking after people elderly and disabled.
The research, carried out by the University of Surrey’s Center for Understanding Sustainable Prosperity and Trinava Consulting with trade union Unison, found that six of the 10 largest adult social care providers for which data was available saw increase its underlying profit margins between 2019 and 2020. , the first year of the pandemic.
The biggest increase came at Runwood Homes, where the underlying profit margin expanded by 37% in 2020, posting a pre-tax profit of £25.4m, up from £15m from the previous year, according to the research. A quarter of its homes are qualified for improvement by the Care Quality Commission.
The highest margin, 41.7%, was at Avery Healthcare, up from 39.8% in 2019 and 32.5% in 2015. The company, which runs 56 care homes in the UK, to be recently acquired by the Reuben Brothers, named as the second richest family in the United Kingdom. with an estimated fortune of £21.5 billion, in the company’s first investment in the aged care sector. A March press release said the deal, a joint venture with US real estate investment trust Welltower Inc, was expected to “generate significant future growth opportunities”.
The findings will fuel concerns about take-up by private suppliers despite Covid pressures, and come amid reports of cost-cutting at some chains and continued low wages for many employees.
Vivek Kotecha, public policy consultant and director of Trinava, which conducted the analysis, said: “During the pandemic there was a sense of national solidarity and sacrifice that was needed. I think people will be surprised to see that some companies seem to have come out of the pandemic very well.”
He added: “What it shows is that these companies have high expectations to maintain profitability, and workers and residents are feeling the brunt of that pressure.”
As well as widening profit margins, some providers also increased the pay of their senior executives during the pandemic, despite pressures from Covid and the staffing crisis in social care, research has found.
Runwood’s billionaire owner Gordon Sanders received an extra £2m in dividends in 2020, taking in £3m this year compared to £1m in 2019. The company accepted £2m in payouts of taxpayer-funded leave and Covid grants over the same period, according to Companies House. records
The highest paid director of providers, at Barchester Healthcare, received £2.27m in 2020, up from £2.02m in 2019 and £699,000 in 2015. Posts for healthcare workers in Barchester, owned by Jersey-based Grove Limited. , were advertised last week for £9.90 an hour, just above the minimum wage.
The findings come amid warnings that the social care sector is in crisis. The British Medical Association warned in June of a “ticking time bomb”, saying years of chronic underfunding, severe staff shortages and an aging population meant that many in the future, particularly the most disadvantaged, they wouldn’t get the attention they need. “This situation has been exacerbated by the pandemic and the government’s proposals to shape the future of social care have fallen far short of what is needed,” he said.
Last month, a Unison report highlighted the growing role of private equity in the sector, finding that more than one in nine (12%) care beds in the UK were now held by private equity firms investment It also revealed cost-cutting at several unnamed companies, including allegations of substituting food and cleaning products for cheaper substitutes and reducing residents’ meals from three to two a day.
Christina McAnea, Unison’s general secretary, said: “The sector is on its knees, staff are leaving in droves and those who rely on care are being treated harshly. However, many care home owners they continue to see their financial fortunes rise in the midst of this crisis. Root and branch reform is now needed with leverage removed from social care.”
Avery Healthcare and Runwood Homes declined to comment.
Barchester Healthcare said it was investing in care homes and staff were receiving regular pay rises and loyalty bonuses. “In the six years from 2015 to 2020 inclusive, we invested a total of around £56 million in capital expenditure on properties and improvements to our services, to ensure residents live and staff work in the best possible conditions “, he said. He added that the £2.3m figure given in the company’s accounts for the highest-paid director included a “non-recurring payment related to a long-term incentive plan”, and not just salary.