Over a third of new care homes fail within five years

More than a third of new businesses in the care home sector do not survive beyond five years, according to new analysis of Companies House data.

Caredemy looked at care sector companies set up between January 2021 and December 2025, checking how many had gone into administration, liquidation or been dissolved. 

The research found 39.2% of new care-related businesses – 25,201 out of 64,190 – have already closed their doors. 

Residential nursing care homes had the highest closure rate at 43.2%, while services for people with learning difficulties, mental health issues and substance abuse saw 43.5% fail. What’s more, homes for the elderly and disabled recorded a 41.4% failure rate.

Other residential care services closed at 36.1% and nearly a third (31.6%) of child daycare ventures also collapsed. 

Businesses dealing with other residential care activities recorded a 36.1% closure rate, and child day-care activities fared slightly better but still saw nearly a third (31.6%) of new ventures collapse.

In response to the findings, a spokesperson at Caredemy said: ‘Since the pandemic, it feels like the prices never stop going up. First, it was the food bill increasing, but now almost every care home is watching costs jump every single month.

‘Care homes can’t cut corners when it comes to essentials. After all, they need to ensure residents get the care they deserve. But the Autumn budget is adding to this pressure and cutting costs at the other end.’

‘The minimum wage is set to rise again in April, and employer National Insurance contributions have already gone up, which forces facilities to make really tough choices just to keep the lights on,’ they added. ‘Not to mention, finding staff can be really challenging. Since the rules tightened on hiring workers from overseas, the pool of talent is shrinking, and hiring has dropped by more than half in just one year.

‘Unfortunately, the business model is broken. Most care homes run on extremely thin margins, with even the smallest increases in costs putting some businesses into administration.’

Image: Age Cymru/UnSplash 

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