The rising cost of care in 2025 is having a real impact on families. Several factors have come together to drive this increase, with the cost of living crisis playing a central role. Here’s a closer look at the key reasons behind the rise in care costs:
Rising Wages in the Care Sector
Care workers have long been underpaid, but as inflation affects everyone’s daily expenses, carers are pushing for higher wages. The care sector is facing a significant staffing crisis, with many positions unfilled due to Brexit, low pay and difficult working conditions.
Employers are raising wages in an attempt to retain staff, but this is naturally driving up care costs for families. When staffing levels can’t be maintained, care providers often turn to agency workers, who tend to cost more, adding further pressure on budgets.
Increased Demand for Care Services
As the UK’s population continues to age, the need for both residential care homes and homecare services has grown substantially, which places added strain on the entire sector. The number of people requiring state-funded care at local authority rates has increased significantly. Local authority rates present challenges for care homes as these rates can be hundreds of pounds lower a week than homes need to charge to remain financially viable, which means homes have had to increase the fees they charge private self-funders to plug this shortfall.
Energy and Operational Costs for Care Providers
In the last couple of years, care homes, like other businesses, have been feeling the impact of rising energy prices. As they provide a 24-hour service they require a constant supply of power for heating and lighting, making them particularly vulnerable to fluctuations in energy costs. With energy prices continuing to climb, many care providers are finding it harder to keep up with their operational bills, and as a result, are having to increase their fees to cover these additional expenses. Similarly, the cost of everyday items such as food and cleaning supplies have risen, further adding to operational costs.
Labour Government’s Recent Budget Changes
The rise in employer National Insurance contributions and the raising of the minimum wage announced in 2024 by the Labour government have created a new financial strain on the care sector. Whilst the NHS and public sector bodies have been shielded from the tax rise, private care homes and hospices are not exempt. This increase in National Insurance contributions has placed additional pressure on care providers, especially those with large workforces. The increase in the minimum wage has also particularly impacted the care sector. These combined extra costs will ultimately be passed on to families in the form of higher care fees. Small GP practices are also feeling the weight of these changes, with many expressing concerns about their ability to stay afloat under the added financial burden.
How we help
As you can see, the sharp rise in care costs in 2025 is a result of a combination of factors - rising wages, higher demand for services, increased operational costs, and the impact of tax changes. The cost of living crisis has exacerbated these challenges, making it more difficult for care providers and families to manage.
If you'd like to arrange a telephone consultation or care advice visit with one of our Care Advisers to discuss the different care, support and funding options available for you or your family member, make an appointment with one of our expert Grace Care Advisers. We provide a listening ear and ensure you are fully informed about the most appropriate care options for your family member’s particular situation and we can research the most suitable care providers to meet your family member’s care needs, wishes and available funding.
Grace Consulting are the UK’s founding providers of expert independent advice on elderly care advice, neurodiversity advice and special needs advice.
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