The analysis found that 47 care home operators in England and Wales became insolvent last year, up from 40 in the previous year, an increase of 18%.  The number of failures is up by a third over the last three years, up 34% from 2012/13 when there was 35 insolvencies.

Estimates suggest there will be a £2.9bn annual funding gap in social care by the end of the decade, according to the Local Government Association. It also forecasts that the introduction of the National Living Wage (NLW) is likely to increase financial pressures on the sector as staff costs rise.

Mike Finch, partner at Moore Stephens, said: ‘Care homes have come under increasing financial strain and, with a sharp increase in their wage bill, many more risk being pushed to breaking point.’

As well as a constrained local authority funding pot, alternative sources of income are also changing for care homes following sell-offs of lucrative property portfolios and increasingly expensive leaseback arrangements which are adding to cashflow issues.

‘Many care homes have lost control over their increasing property costs by selling ownership of the property they occupy to an investor and then renting the property back from the same investor with pre-agreed rent increases they can no longer afford,’ Finch said.

A squeeze on local authority funding of social care is also impacting the sector.

‘With local authorities contributing a substantial amount to the revenue of care homes, there is understandable concern of the impact any further spending cuts would have on the sector. This is especially important as the cost of care in the UK remains high.

‘Although legislation giving local authorities powers to increase council tax by 2% to help fund social care is a step in the right direction, there is real concern that this will not meet the spike in demand caused by the UK’s aging population.’

The UK’s aging demographic will see a rise of 12% – or 1.1m – in retirees between 2015 and 2020.