The UK adult social care sector: is something going to give?

More than five years after the collapse of the UK’s largest independent provider of adult social care (ASC) services, the ASC market remains in flux. Although the provider’s flawed strategy was partly to blame for its downfall, so too were structural factors like declining fees, rising operating costs, and tighter regulation. Similar conditions exist in today’s market, presenting both challenges and opportunities for ASC operators.

At a glance

• The line between health and social care is blurring, and ASC companies must adapt to this trend.
• Services for individuals with acute care needs are generally more profitable. But not all providers have the funds or staff needed to serve this population.
• Steady declines in public funding are forcing some providers out of the market. Others are shifting to a private-pay model or focusing on higher-value patients with acute needs.
• Regulatory requirements are pushing up demand for additional staff, while competition from other private employers is shrinking the pool of available labor.
• Although demand from both equity and debt investors for prime ASC assets remains robust, leverage may be building up, posing a considerable threat to some operators.
• Given these dynamics, some operators will likely fold. But resilient businesses will be able to adapt to challenging conditions and even increase their market share through acquisition.