New analysis reveals that nearly four in ten care businesses fail within five years, raising urgent questions about funding, workforce pressures and the long-term sustainability of the sector.
New analysis of Companies House data highlights a stark reality for the care home sector: over a third of newly established businesses are failing within just five years.
Caredemy analysed data from Companies House to determine the number of care-related businesses incorporated between January 2021 and December 2025, comparing this with those that have since entered administration, liquidation, or been dissolved. The findings are striking. Of the 64,190 businesses opened during this period, 25,201 have already closed—equating to 39.2%.
The research also reveals variation across different parts of the sector. Residential nursing care facilities have seen some of the highest closure rates at 43.2%, followed closely by residential care activities for learning difficulties, mental health and substance abuse at 43.5%. Residential care for the elderly and disabled stands at 41.4%, while other residential care activities and child day-care services also face significant challenges, with closure rates of 36.1% and 31.6% respectively.
These figures point to deeper structural pressures facing the sector. According to a spokesperson at Caredemy, the financial environment for providers has become increasingly difficult to navigate.
“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.
“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. To fill the gaps, homes have to bring in agency staff, but that is incredibly expensive.
“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. That is why thousands of beds are disappearing, leaving many people vulnerable.”
The data raises important questions about the long-term sustainability of the sector—and what these closures mean for those who rely on care services.
When it comes down to it, the sector is in a pretty tough place right now. For owners, it’s becoming harder and harder to make the numbers work. Costs are rising, staffing is a constant challenge, and margins are already tight. For workers, the job is demanding and not always seen as an attractive long-term career. There isn’t a clear path forward, especially without continued reliance on overseas workers to fill gaps, and even that feels more like a short-term fix than a long-term solution.
Costs are going up across the board, from wages and National Insurance to energy and food, but funding and fees haven’t always kept pace. When you’re already operating on very tight margins, even small increases can quickly become unmanageable.
Staffing is a constant challenge. Fewer people are entering the sector, and the work itself is demanding, both physically and emotionally. That makes it harder to recruit and even harder to retain people, which then pushes providers to rely on agency staff or overseas workers just to keep services running.
Yes, definitely. Services that support people with more complex needs have been hit hardest. They need more staff, more training, and more resources to run safely. So when costs go up, or staffing becomes an issue, those services feel it first.
What’s really changed is that the problems exposed during the pandemic never fully went away; they’ve just become part of everyday life. During COVID, it felt like a crisis, with staff shortages, huge emotional strain, and a sense that the sector was being overlooked. A lot of workers came out of that period burnt out and still feeling undervalued.
Unfortunately, staffing gaps are still there, costs keep rising, and the underlying issues around funding and support haven’t been properly addressed. So instead of recovering, the sector is dealing with a long-term strain.
The biggest impact is simply fewer options. When care homes close, there are fewer places available, and that can mean longer waits or having to move further away from family. For people who rely on care, that uncertainty can be really difficult. Understandably, many worry about how a move will affect their loved one, especially if they have dementia or more complex needs.
It makes things a lot more uncertain. If you’re constantly dealing with staffing gaps and rising costs, it’s hard to think long-term. Many providers are focused on just keeping things running day to day, rather than investing in growth, training or new services.
There needs to be a more realistic approach to funding and workforce support. Providers need enough backing to cover rising costs and invest in their staff. But equally,
care work needs to be seen and treated as a skilled, valued profession, with fair pay and clear progression.
In the short term, it’s about holding on to the staff they’ve got and making roles more sustainable. That could mean investing in training, improving support on the job, and reducing reliance on agency staff where possible. But realistically, providers can only do so much on their own; wider changes are needed to really fix the underlying issues.
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