Moore Stephens reviewed Companies House data for the year to 27 July 2017.
It found there were 1,210 “financially stressed” care home companies out of a total of 7,497, representing 16% of businesses, up from 12% the previous year.
Lee Causer, restructuring partner at the firm, said care home providers were struggling to offer a high standard of car and meet increased demand whilst remaining solvent.
He said: “Concerns have also been raised that private care home providers unable to make a profit will hand back contracts to local authorities.
“It’s critical that care home companies receive the funding they require in order to offer the highest standard of care possible.”
The firm stated: “A persistent lack of funding from local authorities to the sector has also put considerable pressure on care homes. Local councils have been forced to make cuts in their budgets to social care despite the need for care homes and other social services growing.”
The increase to the National Living Wage (NLW), which took effect in April, is one of the major drivers in the increase of struggling care homes, Moore Stephens said.
The NLW is £7.50 per hour, 6.4% above the national minimum wage, and is due to rise again to £9 per hour in 2020.
Moore Stephens also highlighted the recruitment problems and greater use of agency staff in care homes, which also drives up costs.
The analysis from Moore Stephens, published last week, follows a study by the Association of Directors of Adult Social Services, which revealed that councils in England were planning to make £824m of savings in their social care budgets in 2017-18, despite an extra £2bn over the next three years in social care funding being promised by the chancellor in the March budget.
