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Executive Summary

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EXECUTIVE SUMMARY

MSI believe that the value of the UK elderly care home market increased marginally between 1995 and 1999. During 1999 the total UK market for the long-term care of the elderly increased by some 3 percent to œ6.33 billion (euro9.81 billion). MSI believe that growth in the market has been subdued due to the introduction of the Community Care Act reforms in 1993 and its subsequent impact on the market.

Since the Community Care Act was reformed in 1993 it has continued to create unfavourable market conditions for many operators. The Act has resulted in stringent local authority funding restrictions, which has reduced the number of people qualifying to receive funding for places in long-term care. The Community Care Act has been a major contributory factor to the decline in both occupancy levels and profit margins throughout the review period.

MSI believe that there has been a decline in the number of care homes in the UK between 1995 and 1999, reflecting the low occupancy levels and the consolidation which has occurred in the nursing and residential care home industry during the review period. Indeed, MSI estimate that there were only 15 125 care homes for the elderly operating in the UK in 1999, reflecting a decline of 6 percent compared with 1995.

Due to stringent restrictions on expenditure for long-term care, it has become evident that local authorities have moved towards becoming a purchaser of care, as opposed to a provider, during the review period. Both the voluntary and private sectors for residential care have benefited from the changing role of local authorities. Indeed, much of the increase in both the value and the volume of voluntary and private homes as well as places is believed to be largely attributable to the change in role of local authorities.

MSI believe that the number of sheltered accommodation units in the UK declined during the review period. The decline was partly due to the government's objective of increasing the independence of the elderly and promoting care in the community. According to trade sources, although the domiciliary care market has benefited from this, it has had a negative impact on the sheltered accommodation market. As a result of these factors, MSI believe that people will be entering care accommodation at a later stage of life, and as a result the degree of care required by the individual is expected to warrant that provided in either a nursing or residential home.

MSI believe that the demand for places in care homes in the UK is affected by a number of factors, which include:

• demographic changes
• government policy
• funding
• National Health Service reforms

The total UK market for care home accommodation for the elderly is forecast to increase by 8 percent in real terms between 2000 and 2004. However, MSI forecast that more significant market growth will continue to be hindered by the Community Care Act. In turn overall occupancy levels will be affected and as a result are expected to remain below 90 percent which will lead to further pressure on profit margins.

Growth in the homes for the elderly market will also be hindered by demographic changes during the forecast period. Trade sources report that between 2001 and 2004 there will a fall in the number of 85-year olds in the UK, reflecting the fall in the birth rate in the UK during the First World War. MSI believe that this will have a direct impact on demand for places during the forecast period.

Text © 2000 MSI

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Last updated by Duncan Nottage 4th November 2000