The 2025-2026 healthcare landscape
UK regulated healthcare enters 2026 in a structurally difficult position. The CQC-registered care home count fell year-on-year in 2024-25 across both nursing and non-nursing categories — 4,186 care homes with nursing and 10,301 care homes without nursing, per Skills for Care's State of the Adult Social Care Sector and Workforce in England 2024-25 report. Domiciliary care, by contrast, expanded from 13,733 to 15,232 organisations over the period — reflecting commissioning shifts toward home care. The two trajectories tell parallel sector stories: residential care contracting; domiciliary care expanding.
The cost pressure stack is acute. The October 2024 Budget changes (employer NIC threshold reduction, NMW increases) added material cost across the sector. The Nuffield Trust estimates indirect NIC costs to local authorities at £665 million for 2025/26 — the cost passes through to providers in the form of higher fees, but Labour's £502 million local government finance settlement only partially offsets the direct impact and provides nothing for the indirect impact. National Living Wage reached £12.21 from April 2025; rising to £12.71 from April 2026.
The funding regime is evolving but slowly. The October 2025 announcement of an Adult Social Care Negotiating Body to be established in 2026, with the first fair pay agreement coming into force in 2028, represents the most substantial structural reform in adult social care funding in years. £500 million allocated for the agreement is approximately 2% of 2023/24 social care spending. The independent commission on adult social care launched in January 2025 will produce initial recommendations in 2026 with final proposals not expected until 2028.
Capital limit changes from October 2025 (£23,250 to £100,000 for state support eligibility) have expanded the state-funded resident pool. The change provides protection for self-funders previously running their assets down to qualify but does not necessarily improve provider economics — state-funded fees remain materially below true care delivery costs in many cases. Average residential care costs reflect the sector's economics: £1,298 per week for residential care without nursing; up to £1,564 per week for nursing or specialist dementia care. Approximately half of all residents pay the full amount as self-funders; the remainder are funded by local authority, NHS Continuing Healthcare, or NHS Funded Nursing Care, typically at rates that fall short of true delivery cost. The result is a sector that increasingly depends on self-funder cross-subsidy of state-funded residents to remain viable.
Why care homes and healthcare providers fail
Healthcare and care home failures cluster around predictable structural patterns. The IQ Insolvency engagements in this sector typically show a combination of:
Local authority fee deficit. Many care homes rely on local authority-funded residents at fees that fall short of actual care delivery costs. Where the proportion of state-funded residents exceeds the level supportable by self-funder cross-subsidy, the home runs at a loss.
Wage cost shock. October 2024 Budget changes — employer NIC threshold reduction, NMW increases — have compressed margins materially. For a typical 50-bed care home with 50-70 employees, the cumulative annual impact often exceeds £100,000-£200,000.
Ageing infrastructure. Many UK care homes operate in older buildings requiring substantial capital investment to meet evolving fire safety, environmental, and care quality standards. Where cash flow does not support investment, CQC ratings deteriorate — producing a self-reinforcing decline.
CQC rating impact. Poor CQC ratings (Inadequate, Requires Improvement) deter self-funder enquiries, affect local authority placement, and increase insurance premiums. Homes in special measures often experience accelerated occupancy decline that the cost base cannot accommodate.
Occupancy declines. Occupancy is the central operational lever for care home economics. A 50-bed home running at 95% occupancy may be profitable; the same home at 85% may be loss-making; at 75% may be unrescuable. Local authority placement decisions, regulatory action, reputational events, and demographic factors all affect occupancy.
Workforce challenges. Carer turnover (38% for under-25s per Skills for Care), recruitment difficulty (74% of domiciliary care organisations report recruitment challenges), and reliance on international recruitment (with visa route changes affecting availability) combine to drive up agency staff costs and operational pressure.
Leasehold and rental costs. Leasehold care homes are particularly vulnerable to rising rents and property-related costs, particularly where landlords are themselves under refinancing pressure.
Where multiple of these factors are present concurrently — which is most distressed care home scenarios — the position is typically structural rather than cyclical. Time to Pay arrangements and other liquidity-bridging measures cannot resolve structural margin compression.
Sector-specific procedural framework
Why CQC registration shapes everything
CQC registration under the Health and Social Care Act 2008 is a legal requirement to provide regulated activities. Registration is granted to a specific provider (corporate entity) and a specific registered manager. Registration is not automatically transferable to a buyer — any new operator must be separately registered with CQC, which typically takes 8-12 weeks for a routine application. This procedural reality dominates regulated healthcare insolvency: the buyer in a going-concern sale must either already hold registration for the relevant regulated activity (typically a sector consolidator) or must obtain registration quickly enough to avoid disruption to residents.
Continuity of care as the central objective
Where residents are in occupation, the continuity of care for those residents is the central objective alongside (and typically ahead of) creditor outcomes. Forced resident transfers — where a home closes and residents must move to alternative provision — carry well-documented mortality and morbidity risks for older residents, making forced closure a measure of last resort. The procedural framework therefore prioritises continued operation through administration with going-concern sale to a properly registered buyer.
Engagement with CQC, local authorities, and commissioners
Regulated healthcare insolvency requires early and substantive engagement with: CQC (regarding regulatory continuity and any registration transition); local authority commissioners (regarding placement decisions and continued funding); NHS commissioners (where NHS Continuing Healthcare funding applies); resident representatives and families (regarding continuity expectations); and trade unions and staff representatives (regarding TUPE transitions and consultation). The IP must coordinate this engagement alongside standard creditor and lender engagement — producing a substantially more complex stakeholder management challenge than typical insolvencies.
The principal procedural routes
When CVA can preserve the business
Company Voluntary Arrangements are appropriate for regulated healthcare operators with viable underlying businesses but unsustainable balance sheet positions. Healthcare CVAs typically involve compromise of unsecured creditors; restructuring of lease obligations (particularly important for leasehold care homes); HMRC support given the Crown preference comparator; and continued trading throughout. Successful healthcare CVAs require a fundamentally viable underlying business, landlord engagement on lease modifications, CQC awareness (CQC may be a stakeholder where regulatory concerns exist), and disciplined post-CVA execution.
Restructuring plan (Part 26A)
Restructuring plans under Part 26A of the Companies Act 2006 (introduced by CIGA 2020) are an increasingly relevant option for substantial regulated healthcare operators. The Lifeways 2023 plan was the first successful use in regulated healthcare — covering seven group companies, approximately £190 million of secured debt, 10,000 employees, and 4,200 residents/users, with restructuring including £100 million senior debt write-off, £15 million super senior new money, and compromise of unsecured debts (including English and Scottish lease compromises). Restructuring plans are most useful for larger operators with complex capital structures and cross-class issues that ordinary CVA cannot address. The procedure preserves corporate structures, management, and regulatory approvals — particularly important in regulated healthcare where regulatory continuity matters.
Administration and pre-pack
Administration is the most common procedural route for distressed regulated healthcare operators where CVA or restructuring plan is not appropriate. The administrator's objective hierarchy under Schedule B1 IA 1986 is: rescue the company as a going concern; achieve a better result for creditors than liquidation; or realise property to make a distribution. In regulated healthcare, the going-concern objective is typically pursued through sale to a properly registered buyer — often a sector consolidator or established operator with capacity to absorb new sites. Pre-pack administration is common where speed of transition matters (which is most regulated healthcare cases given the resident continuity priority). Connected-party pre-packs are subject to the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021.
When CVL is appropriate
Creditors' Voluntary Liquidation is rarely appropriate for regulated healthcare operators while residents are in occupation — the cessation of trading required by CVL conflicts with the continuity of care obligation. CVL becomes appropriate after residents have been transferred to alternative provision (usually following a CQC-driven closure or a planned wind-down); when the business is closed-empty and only residual creditor administration remains; or when the regulated activity is no longer being conducted (for example, where a domiciliary provider has lost all contracts and ceased trading). For non-residential regulated services (dental practices, GP practices, supported living without 24/7 occupation), CVL becomes more readily available.
Sub-sector distress patterns
Regulated healthcare distress patterns vary materially by sub-sector:
Care homes with nursing typically face the highest cost pressure (qualified nursing wages, infrastructure requirements) and the most complex procedural framework (most regulated activity types, most resident continuity sensitivity, most local authority engagement). Administration with going-concern sale is the dominant procedural route.
Care homes without nursing face cost pressure with a somewhat less complex procedural framework. Pre-pack administration is common where the home has self-funder mix supporting realisable value; CVL after resident transfer is the appropriate ending where there is no going-concern buyer.
Domiciliary care operators face different distress patterns — typically lower fixed assets, no resident occupation, but tight margins and contract-driven revenue. Operating contracts are typically tied to specific local authority commissioners; loss of a major contract can be terminal. CVA or pre-pack administration where the operating platform has value; CVL where it does not.
Supported living operators face complex procedural framework — residents are tenants in their own right rather than residents of a care home, with separate housing benefit funding alongside care funding. Continuity of care obligation is similar to care homes; procedural complexity is higher.
Specialist learning disability and mental health providers (particularly those with NHS-funded placements) face highly bespoke commissioning relationships — distress typically involves NHS commissioner engagement alongside other stakeholders. Larger specialist providers may suit Part 26A restructuring plans (as Lifeways demonstrated).
Dental practices operated as private companies face NHS contract dynamics, partner / associate dynamics, and patient continuity concerns. Procedural framework is closer to professional services than to care homes — typically administration or CVL, occasionally pre-pack where practice value is realisable.
GP practices operated as companies (limited number, given the typical partnership structure) face CCG / ICB contract dynamics and patient continuity obligations. Procedural frameworks here are unusual but increasingly relevant.
Director-specific considerations
Healthcare directors typically face concentrated personal exposure that the procedure must address:
Personal guarantees on lender facilities. Care home senior facilities typically include personal guarantees from owner-directors. PG calls typically follow corporate enforcement — producing direct creditor action against directors.
Personal guarantees on leases. Leasehold care home leases are commonly personally guaranteed — PG calls following corporate procedure typically produce continuing personal exposure for the lease term.
Director's loan accounts. Care home OMBs commonly run substantial DLA balances — particularly where directors injected capital during stronger periods or extracted profit ahead of dividend declaration. The DLA position needs careful review in any procedure — covered in the director's loan account spoke.
Wrongful trading exposure. Continued trading after the point at which insolvent liquidation became unavoidable produces section 214 IA 1986 exposure. In regulated healthcare, the relevant date often crystallises when occupancy falls below sustainable levels combined with rising staff costs — clearly observable markers. Detailed coverage in the wrongful trading spoke.
HMRC personal liability. Where PAYE/NIC arrears reach significant levels, Personal Liability Notice exposure under section 121C SSAA 1992 can transfer corporate liability to directors personally. Healthcare with substantial workforce and tight margins is a sector where PLN exposure is elevated.
Regulatory consequences. CQC may consider director conduct as part of any registration cancellation process. Directors of failed providers may face challenges obtaining future CQC registration as a registered manager or nominated individual. Directors should be alive to the regulatory consequences alongside the financial consequences.
The interaction between corporate procedure, regulatory continuity, and personal exposure is the central commercial question for healthcare directors. Early IP engagement allows the personal-exposure dimensions to be assessed and managed alongside the corporate procedure and the regulatory engagement — typically producing materially better outcomes.
How IQ Insolvency engages with regulated healthcare operators
Every regulated healthcare engagement at IQ Insolvency is led by a licensed insolvency practitioner from the first conversation. The IP works with sector-specialist counsel where the matter requires it — CQC regulatory advice, employment / TUPE counsel, healthcare commissioning specialists, building safety advisers — and engages directly with CQC, local authority commissioners, lenders, and other principal stakeholders throughout. We do not hand cases to junior staff or call-centre teams — the IP you speak to first is the IP who sees the matter through to the final report.
Initial engagement is free, confidential, and without obligation. The first conversation typically takes 60 minutes and covers the realistic position assessment; the regulatory engagement requirements (CQC, local authority, commissioners); the procedural options across CVA, restructuring plan, administration, pre-pack, and CVL; the resident continuity considerations; the director-personal exposure dimensions; and the immediate priority steps. Regulated healthcare matters benefit substantially from earlier engagement than other sectors given the regulatory engagement timelines and registration transition planning needs.
Frequently asked questions
Will my residents be moved if my care home goes into administration?
Continuity of care for residents is the central objective in regulated healthcare administration. Where the administrator can identify a going-concern buyer (typically a sector consolidator with existing CQC registration capacity), residents typically remain in their existing home with operator continuity. Where no buyer can be identified and the home must close, the administrator works with CQC and local authority commissioners on managed transitions to alternative provision — a process designed to minimise resident disruption. Forced closures with abrupt resident transfer are measures of last resort given the well-documented health risks.
Can the buyer of my care home use my CQC registration?
No. CQC registration under the Health and Social Care Act 2008 is granted to a specific provider (corporate entity) and registered manager — it cannot be transferred. Any buyer must obtain their own CQC registration, which typically takes 8-12 weeks for a routine application. Some sector consolidators hold pre-existing registration capacity that can absorb new sites quickly; others need to apply afresh. Pre-procedure planning of the registration transition is a critical part of preserving continuity.
What happens to staff in a care home administration?
In administration with going-concern sale (typically pre-pack), staff transfer to the buyer under TUPE with continuity of service, accrued holiday, and existing employment terms. In administration without sale, staff are typically made redundant by the administrator with statutory entitlements paid by the Redundancy Payments Service up to statutory caps. Collective consultation obligations under TULRCA may apply where 20+ redundancies are anticipated. Healthcare TUPE is procedurally complex given the regulated activity dimensions.
Can I sell the care home and stay involved in the new operation?
Connected-party transactions in regulated healthcare are subject to substantial scrutiny: independent valuation under SIP 16; SIP 16 statement; either Pre-Pack Pool approval or independent qualifying evaluator report under the 2021 Connected Persons Regulations; and in regulated healthcare specifically, CQC consideration of the new structure if registration applications are required. Connected-party retention is feasible but requires careful structuring. The new entity must be separately CQC-registered.
What does CQC do when a regulated provider becomes insolvent?
CQC engages with administrators, liquidators, and the operator throughout the insolvency process. Their priority is regulatory continuity for residents/clients — whether achieved through transfer to an existing operator, administration to a new buyer, or managed wind-down. CQC has statutory powers to cancel registration (typically used where there are also regulatory failures) and to require improvements. CQC's market oversight role extends to monitoring the financial sustainability of providers where market failure could affect resident safety — particularly for larger providers.
How does the local authority feature in care home insolvency?
Local authorities are typically the largest single creditor (or counterparty) in care home insolvencies given their role as commissioner of state-funded placements. Their objectives include continuity of placements for state-funded residents; managed transitions where placements must move; engagement with the administrator on placement fee position during administration; and potential interest in the going-concern buyer. Local authorities have statutory market shaping responsibilities under the Care Act 2014 that affect their engagement with distressed providers.
My dental or GP practice is in financial difficulty. Does this work the same way?
Dental and GP practices operated as private companies follow similar regulated insolvency principles but with a different stakeholder profile (NHS commissioning bodies rather than local authorities; patient continuity rather than resident continuity; partner/associate dynamics rather than care worker workforce). The procedural framework is somewhat closer to professional services than to care homes. Pre-pack administration where practice value is realisable; CVL where it is not. NHS contract dynamics shape buyer interest and timing materially.
Will regulatory action against my home affect the insolvency process?
Where CQC has regulatory concerns (Requires Improvement or Inadequate ratings, special measures, registration cancellation proceedings), these run alongside any insolvency process. The administrator must engage CQC throughout, address regulatory concerns where possible during administration, and consider regulatory status in any going-concern sale (a registration in the process of being cancelled affects buyer appetite materially). In some cases, regulatory action and financial distress are interlinked — an Inadequate rating triggers occupancy decline triggering financial distress triggering further regulatory concerns.
Speak to a licensed insolvency practitioner
If your care home or regulated healthcare business is in financial distress — whether facing imminent enforcement, occupancy decline combined with rising costs, regulatory concerns alongside financial pressure, or simply the cumulative cost burden — the first step is a conversation with a licensed practitioner. Regulated healthcare matters benefit substantially from earlier engagement given the regulatory timelines, the resident continuity priorities, and the registration transition planning needs. There is no charge for the initial consultation and no obligation arising from it. Confidentiality is absolute.
At IQ Insolvency, every regulated healthcare engagement is led by a licensed insolvency practitioner from the first conversation. No call centres. No handoffs. One licensed practitioner, start to finish.
