Report recommends EO solution to looming ‘care capacity and quality crisis’

Care England and eoa publish recommendations as demographic shift and difficult conditions see sector predict 29% provider exit in adult social care

UK: The time is now to explore employee ownership (EO) succession to help retain employees and capacity in the care sector, asserts a White Paper published by Care England supported by the eoa.

The paper, People Powered Care: Leveraging employee ownership as a succession option to retain capacity in the adult social care sector, makes a series of recommendations for care providers looking for exit, “anchor institutions” including local authorities, and the government to make EO is part of the consideration of a looming “workforce crisis” and compounding capacity issues, which it claims already affect care quality.

In their recent Sector Pulse Check survey in partnership with Hft, Care England, a registered charity and the leading and most diverse representative voice of adult social care providers in England, found that 29% of providers shared that they were considering leaving the market for a third year running, noting that the most recent results show that the “the approach to health and social care is not working”.

Just over 90% of those surveyed cited “workforce-related costs” being the largest financial pressure, dominated by local authority fees to providers not increasing in line with National Living Wage, with other significant strains including utilities, maintenance costs and non-payment of bills by local authorities. With increases to employer National Insurance expected to cost the sector a further £2.8 billion, the Health and Social Care think tank Nuffield Trust, warn that “swathes of the social care market” could collapse as a result.

The paper explores how providers in the Adult Care Sector looking to exit the market could help build in sustainability, a better working life and better quality of care by selling their business to their employees.

Professor Martin Green OBE, Chief Executive of Care England, said:

“In our society, adult social care is the foundation of support for millions of individuals and their families, enabling them to live with dignity, independence, and choice. Despite its critical importance, the sector faces extraordinary challenges, from financial pressures to workforce shortages.

“Employee ownership stands out as a powerful, innovative model that can transform how care is delivered, creating a system that prioritises the wellbeing of those who give and receive care.”

The EO sector has grown rapidly in recent years, with over 2,200 employee owned businesses (EOBs) in the UK by the end of 2024. This represents a fifteenfold increase since 2014 when there were only 150 EOBs; more recently the number of EOBs has more than doubled since the end of 2021 and almost quintupled since the end of 2019.

Reflecting this significant growth, evidence suggests that EO is now one of the UK’s most popular succession options, making up 12% of all private company transactions and being the preferred exit strategy of 18% of business owners.

The most common reasons for transitioning to EO include protecting the business’s independence, culture and values, and securing the long-term wellbeing of employees. Also important are the generous tax advantages offered by the EOT, including a complete Capital Gains Tax exemption for owners disposing of a majority of shares to their employees.

James de le Vingne, Chief Executive of the eoa, said:

“Harnessing the evidenced power of EO to drive employee wellbeing, increase productivity and innovation, and root that in communities for the longer term is a compelling proposition for policy makers – in the care sector it could be pivotal in sustaining capacity and delivering the quality of care we all would hope for ourselves when we are at our most vulnerable.

“While on its own it is not a silver bullet to cure the pressures the sector faces, we firmly believe it can be part of the answer, and offer our full support in exploring the opportunity.”

The fast-growing sector has seen a period of learning that has developed a framework of practices that deliver Great EO, with hundreds of case studies demonstrating success.

Shaw Healthcare, which provides a range of residential and non-residential care services for both the elderly and those needing complex care such as those with dementia or additional needs, was crowned Employee Owned Business of the Year in November 2024.

Russell Brown, CEO of Shaw Healthcare, which has 3300 employees, operating 64 registered care services across 57 sites plus Facilities Management services at a further 12 sites, said:

“Employee ownership using the EOT model has been a great journey for us and our employees who now have a stake and a say. Employee ownership has helped us retain our independence and has had a huge impact on staff retention in a challenging sector.

Shaw transitioned to employee ownership in May 2020, two months into the pandemic, feeling the imperative of the move to EO was even greater given the pressures that health and social care would face. In that time, they have seen a 25% increase in turnover, supported in part by reducing costs by reducing employee turnover to below 17%, from 30%.

Russell added:

“I’m very pleased that our collective hard work has meant employees have received a share of over £5.5m of profits since becoming an EOT in addition to an improved benefits package. Importantly, our employees understand it’s because of the excellent care that they’ve delivered.”

You can join Care England, the eoa and Shaw Healthcare for a webinar on what you need to know if considering a move to employee ownership on April 15.