Public sector cutbacks putting pressure on private sector profits

A British firm dealing with business restructurings and bankruptcies reports that UK private sector insolvencies in the health and social services sector are up 49% in the first half of 2011.

The spectacular fall from grace of British nursing home provider Southern Cross illustrated a sector with endemic problems, left ravaged by austerity cuts in public expenditure, MCR partner Sarah Bell reports.

"Reduced Local Authority fees, rising rents, a growing focus on alternative methods of care, an uncertain regulatory environment and increased operating costs are just some of the factors that have contributed towards the perfect storm that has landed in the care homes sector."

Worse, care is threatened:

"The miscalculations made by some indebted operators left them with little option but to reduce investment in order to remain solvent. The human cost of this failure is palpable and illustrates the fundamental flaw in the private model: private operators looking to maximise profits are tempted to reduce the investment needed to provide the best possible care for the most vulnerable in their charge."

Bell warned that private companies' attempts to cut back their level of investment in order to boost profits could have "tragic" consequences for the vulnerable people in their care.

Britain has instituted more public sector cuts than Canada has, to date.

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