Mears exits one-fifth of care contracts amid continued funding gaps

Outsourcing company Mears has ditched one-fifth of its care contracts as the industry struggles to make a profit amid funding cuts.

The firm said today that it had left 20pc of its contracts in 2016, driving its care division to a £1.2m loss, although revenues for the arm rose 5pc to £152.6m.

Many outsourcing firms have struggled in recent years to make care contracts viable after local authorities slashed budgets and wage rises hit profits.

Mears said it had begun the year with the introduction of the new National Minimum Wage “hanging over the care sector”. Hourly wages increased from £6.70 to £7.20 in April.

However, the company’s chief executive David Miles said more consolidation of contracts in the care sector will mean larger organisations will benefit as funding slowly improves.

He said ongoing funding issues will create a “catalyst for change” which will benefit the company in the longer term.

“I think we’ve got a number of clients who are moving away from having a number of providers and want to work with fewer, better run partners,” he said.

“While I don’t expect to see a huge amount of change in terms of funding in the care sector in the short term, the prospects in the medium to long term are good.”