New research by Clearwater International has shown that the UK specialist care market consolidation drive is set to continue.

Increased funding following Covid-19 has resulted in a 34% decrease in voluntary care home closures between 2019 and 2020, according to the findings.

Based on pre-Covid-19 patterns, by 2038 the number of adults requiring care is projected to increase by 29% for those aged 18-24 years and by 57% for those over 65, compared to 2018 figures.

Of spending on long-term care in 2019/20, physical disabilities (£6.3bn) and learning disabilities (£6.0bn) accounted for the largest proportions. £5.0bn (79%) of physical support was spent on adults aged 65 and over, whilst in contrast, only £0.7bn (12%) of learning disability spend related to this age group

A continued increase in the number of patients and the complexity of needs requiring further funding has been observed, with costs expected to rise by 90% for 18-64-year-olds and by 106% for over 64-year-olds.

Employee retention and recruitment challenges, including wage inflation, loss of staff due to Brexit and the pandemic, and the impact of vaccination status on staffing, are shown to be ongoing problems across the sector, with workforce solutions key to delivering services.

With projections indicating further increases in demand for specialist care in the UK and long-term government funding to support the sector secured, investor interest in the independent UK specialist care market has shown no signs of abating according to the report.

An increase in provisions required due to Covid-19 to help providers with rising costs has provided stability within the sector, ensuring financial resilience among providers and as evidenced in a drop in voluntary care home closures between 2019 and 2020. This activity has been credited with attracting new investors to the market, with the sector considered a defensible asset class.

Consolidation looks set to continue with several key drives ensuring trends will endure in the medium to long-term. Consolidation drives likely to persist include growth in volume and diversity of investors seeking to exploit strong long-term fundamentals of a fragmented market, enhanced Care Quality Commission oversight, longstanding recruitment challenges and technological advancement.

Ramesh Jassal, director and international head of healthcare, Clearwater International, said: “There is significant long-term investor opportunity in the specialist care market; demand increases, coupled with the long-term security of government-backed funding with long-term fundamentals in a fragmented market presents an attractive opportunity for M&A activity to take place, and for corporates and investors to participate in improving social infrastructure and making a positive impact in society.”