LaingBuisson has published the 36th edition of its Care Homes for Older People UK Market Report. Some of the headlines from this authoritative annual report are:

  • Total market value for care homes for older people is estimated at £27 billion in 2025/26.
  • Market value has risen by 25% over the last three years (2022/23 to 2025/26), of which:
    • Just 3% was due to rising demand (number of residents).
    • The remaining 22% was due to fee inflation – driven in turn by labour cost inflation from the National Living Wage and the 2025 hike in Employer’s National Insurance.
  • 96% of the UK’s older care home residents live in homes provided by independent sector (mainly for-profit) operators.
  • Self-funded residents account for 45% of demand volume and 55% of total value.
  • Demand for care home places is projected to grow by 37,000 beds (9%) over the next decade, with all additional capacity expected to come from independent sector providers.
  • In what appears to be a major change in market dynamics, the ‘fee gap’ (gap between local authority and private fees) has narrowed in recent years, with the differential reducing from around 40% in the mid-2010s to approximately 25% today. While cross-subsidisation remains a feature of the market, its scale has diminished as council-funded fees have partially caught up.
  • While individual operators’ profitability can vary widely, aggregate EBITDAR (Earnings Before Interest Tax, Depreciation, Amortisation of Goodwill and Rent) stood at a broadly sustainable (but not excessive) level of 19% for all care home groups for older people reporting full profit and loss accounts at Companies House in periods ending in 2024/25.

Care home operators continue to face chronic workforce challenges though, on the positive side, staff turnover rates and job vacancy statistics have both recovered from their immediate post-Covid crisis levels. Market fundamentals remain strong. Demographic ageing is expected to drive continued growth in demand for the remainder of the century – bar the emergence of truly game-changing technologies, such as a cure for Alzheimer’s disease. While the willingness and ability of many public sector commissioners to pay sustainable fee rates remains a major concern, future demand from private payers looks very solid, buoyed up by £1 trillion plus of housing equity in the hands of the generation of people at risk of care home admission, and no expectation of any significant decline in the rate of owner-occupation for at least the next three decades.

Report author, and Founder and Executive Chairman of LaingBuisson, William Laing, says:

“As this report is published, we await the initial report of the Casey Commission, set up to advise the government on how best to create a ‘National Care Service’, with a final report expected in 2028. It is possible that Casey may simply recommend implementation of the Dilnot proposals from more than a decade ago. Dinot’s diagnosis was spot on. But the implementation of Dilnot narrowly missed by Boris Johnson’s government would have risked destabilisation of the independent sector because of ‘payor shift’ from private payers to public sector commissioners and a fall in average fee levels. This may not be the first priority of the Casey Commission, but Casey should be aware of unintended consequences from raising the share of care home demand that comes within the ambit of local authority commissioners.”

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