Cost-Effective Strategies for Resilience and Growth
At Care Circle Network, our expertise equips us to guide care homes through a complex financial landscape. In 2025, public expenditure on adult social care reached £32.0 billion (2023/24), up 6.3% in real terms from the previous year, reflecting sector commitment. Yet, care homes face rising costs from wages (17% real increase in median care worker pay by 2023/24), energy, and national insurance hikes. Low local authority fees threaten viability, contributing to closures, while funding gaps have reduced long-term care recipients by 14,000 since 2015/16. Projections warn of rationing if 2025 costs—like employers’ national insurance increases and the proposed fair pay agreement—are not fully funded. However, the Autumn Budget’s £22.6 billion NHS boost supports social care integration, with £4 billion more earmarked for adult social care by 2028/29 compared to 2025. A new commission led by Baroness Casey is tackling funding reforms.
Care homes are remarkably adaptable, and with strategic financial management, you can turn pressures into opportunities for growth and enhanced care quality.
Identifying Key Financial Challenges
Workforce costs dominate (70% of expenses), driven by the National Living Wage and upcoming fair pay agreements to improve recruitment. Non-staff costs like energy and insurance have surged, while a postcode lottery burdens deprived areas with lower council tax revenue. Unfunded policy changes force local authorities to ration services, limiting long-term care access despite rising needs. Care homes balance budgets against increasing resident complexity and CQC scrutiny.
Positive trends include increased 2023/24 spending power and overseas workforce growth, supporting more people and reversing access declines. Fees for home care and working-age care homes rose 18% and 13% since 2015/16, aiding sustainability.
Guidance on Cost-Effective Strategies
Leverage government initiatives like the Market Sustainability Fund and Better Care Fund to navigate pressures.
- Optimize Energy and Operational Efficiency: Counter inflation with eco-friendly upgrades like LED lighting and smart thermostats, qualifying for green grants and yielding savings. Bulk procurement networks ensure cost predictability, critical as energy bills rise.
- Leverage Financial Tools, Budgeting, and Partnerships: Use predictive budgeting software to forecast 2025/26 impacts from NI contributions and fair pay. Fintech solutions for invoice financing and cost-tracking improve cash flow. Partner with local authorities for fee stabilization and capital investments to bridge gaps.
- Enhance Integration, Prevention, and Revenue Diversification: Collaborate with NHS via Integrated Care Systems to pool budgets, reducing hospital delays and readmissions. Adopt preventive models like reablement to lower long-term costs—widening eligibility to ‘moderate’ needs prevents escalations. Attract self-funders to diversify income, offsetting lower council fees.
- Invest in Workforce Efficiency to Control Costs: Focus on retention to minimize recruitment costs as wages rise. Training and wellness reduce turnover, indirectly cutting expenses—providers with fair pay see improved stability.
Case Studies of Resilience
A Birmingham care home group implemented energy-efficient tech and fintech budgeting, cutting costs by 12% and reinvesting in training. A Manchester care home partnered with NHS for integrated care, reducing readmissions by 20% and stabilizing finances.
Positive Takeaway for Care Homes
Care homes are poised for resilience. Rising expenditure and initiatives like the fair pay agreement enhance competitiveness, enabling service expansion. By adopting these strategies, navigate 2025-2030 pressures as catalysts for innovation, ensuring reinvestment in quality care and long-term viability.
This invites partnerships with suppliers of energy-efficient equipment, procurement platforms, financial tech, and efficiency tools—enabling care homes to optimize resources and thrive confidently.
