The introduction of the new National Living Wage (NLW) that came into force on 6 April will have a detrimental effect on the Welsh care sector particularly in areas outside of Cardiff.
The result will be a rationalisation of the sector with those centres struggling to break even having to close and an influx of property stock coming onto the market.
The realisation on the impact the NLW will have will be more keenly felt in the South Wales Valleys where care homes and nursing centres look after a higher proportion of public funded clients and where fee levels are much lower.
The rise of 50 pence per hour to every worker aged over 25 will therefore result in a disproportionate rise in operational costs, an evident narrowing of margins and a lack of cash to invest.
Outlining the impact the new living wage will have on provision of nursing homes and care centres, Nick Worman from Bruton Knowles is advising all care and nursing home managers review their current operation structure to see if there is any room for manoeuvre before it’s too late.
Nick said: “There is no doubt that the arrival of the NLW will have a big impact on the care sector in Wales and a rise of around 7.5 per cent to their operating costs could see many struggle.
“Because many rely on public funded clients means they will not be able to pass on this new expense. In order to cope with the rise in wage levels there will most likely be a restructuring of the sector with those properties that do not receive the required investment having to reduce their level of service or worse having to shut down.
“The potential reduction in the number of care and nursing homes could have serious implications for those who rely on this vital service, with those in the valleys being hit hardest.
“With wages increasing, margins will decline leading to less investment and stock coming onto the market.”
Conversely in Cardiff with higher proportion of private paying clients, investment is better with banks happy to lend and more property stock being taken up by the sector. Indeed the city has recently seen the development of a number of new care homes years and also the involvement of large corporate operators (BUPA and Barchester) for the first time in many years.
Nick added: “The NLW is seen as a way to help people earn more but its introduction will potentially have an adverse effect on the care and nursing sector.
“We are advising that those involved in the care sector not to panic as there is a great deal they can do. The worst thing to do is nothing and we can help put in place plans that will help with the changes.”