A local view from Santander

Welcome to the new economy. Things have changed for care home operators, and there’s no doubt that we as a bank are now working with clients to meet a new set of challenges.

Up until the onset of the recession, fees were buoyant and the emphasis for many operators was firmly on growth and expansion. Deals were being done on a regular basis on the assumption that the boom would never end. At Santander we were engaged in financing a lot of growth and consolidation within the sector, building on the expertise we have developed over the past 20 years.

Many of our customers are worried about the lack of growth in fee income. In some cases fees are being frozen or even reduced as part of the austerity drive. We have also seen recently the confirmation of a rise in the minimum wage, which is bound to impact on the bottom line and VAT is also set to increase.  There’s no getting away from the fact that we’re in a slow growth phase.

But while that’s true, there are still opportunities in such an environment. Fees aren’t going up, but that doesn’t mean that investment in future growth has to be entirely suspended. Low cost inflation across a number of sectors – especially construction – does throw up an opportunity that more operators are seizing: the chance to expand and improve on their existing operations.

That might mean extending the property, or purchasing land nearby with a view to building. Or, and we’re seeing a lot of this, improving on and upgrading what is already offered. Local authorities will have to be more discerning in how they spend their budgets on care from now on, and so we expect to see a ‘flight to quality’ where only the best homes will prosper. And that requires investment.

Of course, achieving this isn’t easy. In the present economic climate funds are tight. But even in the current economy, a good business plan will attract the interest of a lender like Santander. We are committed to working with care home operators which can demonstrate they have successfully adapted to the new environment. That means tackling issues in a pragmatic way and adapting their plans to make the most of the opportunities that are out there – if you look hard and smart enough.

Jo Phipson, Relationship Director, North Region, Santander Corporate Banking