The Care Sector in a Changing Climate Mark Ellis ACIB Head of Social Care Banking Lloyds TSB Commercial. Agenda. Introduction Where do we stand now? Funding Implications A changing landscape Market opportunities LloydsTSB & you Summary. Introduction.
Where do we stand now?
A changing landscape
LloydsTSB & you
2.8 million people in the UK receive some form of social care
1.5 million people work in social care
Over 36,000 employers
Bigger than the NHS
Care is a significant SME business contributing c£23bn to the UK economy
*Statistics from Social Care institute for Excellence
Ageing population v available funding
Private sector solution?
Time to review market?
Total gross expenditure on adult social services by Local Authorities and the NHS
The social care market is robust, significant and has grown rapidly over the last 15 years…
Source: Personal Social Services expenditure and unit costs - England, NHS information centre
The Deficit Reduction Plan had significant implications for the future of social care…
Growth in the elderly population(a)
Growth in the population with learning disabilities(b)(c)
As funding for social care reduces, demand continues to increase…
Source: (a) Laing & Buisson
(b) ‘Estimating Future Demand for Adult Social Care Services for People with Learning Disabilities’ (2008), Emerson & Hatton, CeDR University of Lancaster
Note: (c) Services provided to new entrants with critical, substantial or moderate needs
In just 10 years time:
12.9m over 65 years of age (16%)
915,000 with some form of dementia
530,000 likely to require residential care (22%)
461,788 Registered bed spaces
But only 437,920 rooms (47,773 twin rooms)
203,527 without en-suite facilities
Therefore only 234,393 single en-suite rooms
36,760 in homes with fewer than 20 beds
Main lending sources:
Royal Bank of Scotland.
Lloyds Banking Group inc(BOS).
Bank of Ireland.
Looking more to serviceability and experienced management than LTV
LTV have reduced from 85% of MV1 to 70/75% of MV1
Interest rate margins have increased-typically 100 basis points 2007 to 300 basis points 2012
London Interbank Ordinary Rate (LIBOR) led lending is more prevalent
Term of loans reduced now 5-25 years.
It is important to keep in mind the range of base rate over the last 40yrs. Base Rate peaked at 17% in 1979.
Base Rate Since 1972
The Dilnot commission has been asked to explore how care costs can be met in the future, how public funding can best be used to support care needs and how individuals can protect their assets against the cost of care.
Estimated cost of implementing proposals £2bn pa
Partnership funding between the state and individual
A cap on social care bills for individuals, above which the Government would fund care
More informal, unpaid care
An increase in the means-testing limit of £23,250A changing landscape (cont.)
Joint commissioning between the NHS and local authorities so that the most cost effective care package is commissioned for each individual
It is believed that it will take some time before fully integrated joint commissioning is a regular feature of the market
Encouraging personalisation where individuals take charge of commissioning their own care services
Personalisation and the growth of the private pay market, in whatever form, are likely to favour larger operators who have well recognised brands and who have a track record of delivering high quality care
Government policy is changing the social care landscape…
Who will win in the current market place?
Value for money
Care providers need to maintain high quality care yet provide services at a lower cost. The big winners in the market will have:
Market leading advantage (not an ‘also-ran’)…
Private pay marketForecast cost to the state and individuals for residential care services
Source: Dementia UK, Laing & Buisson, Department of Health, Alzheimer's Society
Source: Impact of changes in length of stay on the demand for residential care services in England – PSSRU
Consolidation of the LD space
The top ten providers operate 11% of the total number of learning disability residential care beds
Note: Includes only for profit providers
Source: KPMG analysis, Laing & Buisson
Note: (a) Based on daytime, weekday care and assumes residential single room provided by independent sector
Sources: (1) KPMG analysis, Laing & Buisson
(2) Jagger et al. BMC Geriatrics 2011
SOCIAL CARE MAY APPEAR TO LAG BEHIND IN THE TECHNOLOGY RACE, BUT WORK IS BEING DONE THAT COULD TRANSFORM THE PROFESSION IN THE MONTHS AND YEARS AHEAD
Our message to customers remains positive:
We are a bank with a strong heritage and track record in working with customers. We are here for the long-term
We continue to support credit proposals that fulfil our usual criteria of risk / return and structure
Healthcare Banking Specialist teams
Tough at present – and will be for the next 12 months plus
Long term trends remain very favourable
Opportunities available now to grow in the market
Investors remain keen on healthcare (one of top two sectors in recent survey)
Focus on a high quality business meeting care needs
Thank you for listening.