LaingBuisson has published the 35th edition of their Care Homes for Older People UK Market Report, sponsored by CMS.

Highlights include:

  • The total market value for care homes for older people was £26.2 billion as of December 2024, according to latest estimates by industry experts, LaingBuisson. The independent sector accounts for £23.8 billion (91%), with the remainder being local authority and NHS-supplied care.
  • The total market value for independent care homes for older people grew £1,963 million year-on-year. This represents an annual growth of 9.8%.
  • There were an estimated 153,800 independent sector care home residents receiving dementia care in the UK at the end of 2024. The cost of providing this care was £10.3 billion, or 43% of the cost of all older care home residents with or without dementia.
  • Private payers pay more for places in the same care homes than people whose care is paid for by the local authority. Weekly differences between local authority-funded placements and private payers average approximately £369 for nursing care and £370 for residential care.
  • The amount paid for care also depends not just on who pays, but where. The highest fee levels are concentrated in the South East while the lowest fees are found in the North East, Midlands, South Yorkshire and the North West.

The independent sector care homes for older people market has continued to grow in value, driven primarily by rising costs on care home operators as mandatory national living wage and national insurance employer contribution uplifts push home care home weekly fee levels. The market value uplift is supported by a modest rise in demand, as the number of residents of independent sector (for-profit and not-for-profit) care homes for older people, including those with dementia grew by 1.3%, according to research published by LaingBuisson.

The growth in market value is being driven primarily by higher fees. This is driven in part by underlying cost drivers but also reflects the growing requirements to provide dementia care in all older people care home settings. The higher complexity needs – requiring specialist nursing and other support structures -of those with dementia necessitate higher fee levels, and the growth in this segment supports increases in the overall value of the market.

The private pay market for residential care remains buoyant, with occupancy rates continuing to improve from the Covid dip and private pay fee rates substantially higher than council-paid rates. There is a significant disparity between the amount that local authorities and private individuals pay for their care. The average weekly fee paid by councils for nursing care (2024/25) is estimated to be £1,225, whilst private pay clients pay an estimated £1,594 on average (£369 difference). For residential care, councils pay £908 on average, with private payers charged £1,278 on average (£370 difference).

The whole story though is not told just by considering the averages. At the top end of the spectrum, private payers who need specialist nursing care have seen fees rise, with one in seven homes that provide nursing care now charging this group over £1,800 per week.

Care home fee levels also vary across the country, with those in the north and the midlands paying substantially less for care than those in the south and London. The North East has the lowest weekly fee for nursing care and residential care. In Derby, the weighted average nursing care fee per week is £1,099, while for residential care it’s £863. The most expensive average fees can be found in York, where people may find themselves paying £1,172 per week on average for residential care, and £1,748 per week on average for nursing care.

With national average occupancy rates around 87%, according to DHSC’s capacity tracker, there remains sufficient spare capacity in most areas of the country to mitigate the impact of any future capacity reduction on consumer choice – subject always to providers’ ability to staff their physical capacity. This suggests that, within a buoyant market, there is still capacity within the sector to accommodate additional need.

Whether additional capacity will be needed remains to be seen. The expansion of housing with care as an alternative to residential care may now be the principal brake on growth in the care home market. Housing with care capacity has expanded at a CAGR of 4.7% in the decade from 2014-24, mainly through social funding, but also as private investment in care villages.

Author of this year’s report, and Founder and Executive Chairman of LaingBuisson, William Laing said:

“Last year, we highlighted that those paying for their own care were effectively subsidising the cost of care paid for by local authorities. Local authorities are using their large purchasing power to drive prices down. This hasn’t changed. People are paying more for their nursing and residential care if they pay privately than if their spot is paid for by the local authority.

“This discrepancy between council and private payer prices can’t continue, but it’s difficult to see how it can be resolved with costs expected to rise from the employer National Insurance contributions and the increase to the national living wage. Operating costs will undoubtedly rise, and they’ll need to be covered by someone.

“Labour is finding the Gordian Knot of social care reform as difficult to unpick as their Conservative predecessors. Their first six months in office will have done little to reassure the sector that concrete attitudes will follow the well-meaning platitudes – with the Casey Commission on social care funding due to report back a mere 17 years after Dilnot published his recommendations for a care cost cap.

“Having reported on the care home market for 40 years, if there is one piece of advice I’d have for the government: focus their impact assessment on the risks of destabilising the care home sector. As long as private payers are subsidising public fees, any social care funding solution that suddenly broadens an individual’s access to public funding could drastically impact the viability of many care home operators.”