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Blog - Domiciliary care sector sees unexpected growth

Blog - Domiciliary care sector sees unexpected growth

Wednesday, 11 July 2018

Recent research demonstrated an above average level of new care agencies opening their doors for business. This unprecedented level of “fresh blood” to the sector is positive news amongst the doom and gloom we have seen recently in the media. Research indicates the county of Hertfordshire alone saw a staggering 68% increase in the number of new providers to the area within the last 6-12 months. This will have an amazing and welcome effect on the local community and economy, offering more jobs and more choice for the end user. Demonstrating a much needed regeneration of businesses, this will also give business owners more options for their exit strategy as they come up for retirement.

Turbulent few years

It has been a turbulent few years for the care sector, with heavy focus on the Government to provide more financial support, charge rates being cut by local authorities, the increase in the living wage, and the introduction of work place pensions as well as inflation rises. Social care has had a bit of a battering, coming under HM Revenue & Customs’ spotlight for a number of reasons, particularly regarding travel time and those providing night shift care. This has all led to a negative perspective of the sector with many concerns over the potential collapse of the care system, which relies on independently run domiciliary care agencies to support the NHS and care in the community.

This is a sector which has been heavily consolidated over the last 7-10 years through active private equity and venture capitalists acquiring care agencies under their ‘buy and build’ strategies. However, many are now stepping away from the sector as it no longer offers the high profit margins it once did.

All in all, this has slowed down the sector for business sales, almost bringing it to a stagnated position due to smaller margins and uncertainty. For a mature industry such as the care sector, this has left many long-standing business owners wanting to retire but at a loss for options, and deal values on the low side in comparison to some 5-10 years ago.

However, things are changing and in the last 12 months, the sector has experienced a well-earned breathing space from consolidation.

A brighter future

Care providers who have weathered these challenges are noticeably pushing back on their client base and the local authorities with charge rate increases. The biggest change has been through diversification with many providers expanding their service offerings, specifically targeting a private client base or clients with more complex care needs as well as enhancing the already high quality of existing services provided.

Need help?

To learn more about the current economic climate for the health and social care sector please contact me on 0330 024 088. I’d be delighted to discuss your strategic exit or growth plans.

Kate Baines – Corporate Finance Manager

Data Source: LG analysis of data for Hertfordshire Care Agencies (performed by Kate Baines for a client)

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