Insolvencies rise with council cuts

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The Independent Online

The number of care home businesses going bust has more than doubled over the past year, as they are hit by local council cutbacks and rising debt.

The accountant Wilkins Kennedy said 73 care home companies went into administration in the 12 months to the end of September, up from 35 in the previous 12 months.

Anthony Cork, a partner at Wilkins Kennedy, said: "The care sector has gone through a long period of expansion during the boom years with many companies taking on large debts to fund growth. This worked fine as long as local government funding kept increasing, but with the recession and the cutbacks that ensued, many care homes found themselves unable to service their debts."

Among those declaring insolvency were Stockport-based Grosvenor in July, Winnie Care of Cheshire in April, Ascot Care last December and Southern Care last October.

Some homes which arranged a sale and leaseback to free cash for expansion are now faced with rent increases that are far above market rates. "This led to a major cashflow squeeze when local authority funding started to decline," Mr Cork said.