Bureau Recommends: Care sector propped up by debt

The Bureau Recommend’s the Guardian’s comprehensive study of the financing of the care sector in the UK .

The paper estimates that 135,000 people are being cared for by leading private-equity backed care operators, and that number could be set to increase as the Department of Health opens up the £23bn social care sector to more private firms.

The investigation found that private equity backed companies have interests across the social care sector, from children with severe learning disabilities, to adults with mental health issues, dementia and drug and alcohol addictions and older people in need of residential or domiciliary care.

Related article: Private Healthcare provider to go public despite financial woes 

Opposition leader Ed Milliband has accused such firms of ‘asset stripping’ and questions have been raised over whether private equity companies whose financial models involve heavy debts are suitable for the running of care homes. Milliband has labelled them ‘predators’ as many are registered overseas and their ownership, governance and financial arrangement are largely kept secret.

Earlier this year the country’s largest care provider Southern Cross collapsed under the weight of its private equity sale and leaseback model, it has just been taken over by Four Seasons Healthcare which is owned by a consortium of members, including a 40% share by RBS.

Critics say many private companies’ extensive use of debt to finance deals makes several operators appear vulnerable, prompting fears that banks and investors could demand the debts be repaid, causing the operating company to go bust – leaving staff and resident at risk.

To read the Guardian’s analysis in full, click here.