The number of care home insolvencies has jumped by 18%, as local authority spending on care homes continues to fall.

New research by Moore Stephens, an accounting and advisory network, discovered 47 care home operators in England and Wales became insolvent last year, up from 40 the previous year.

It also revealed the number of care home businesses becoming insolvent has risen by 34% over three years. There were 35 in 2012/13.

Moore Stephens argues the insolvencies are the result of the decline in council spending on care homes and warns there will be a £2.9bn annual funding gap in social care by the end of the decade.

This will be partly the result of the UK’s aging population, which is predicted to rise by 12% – or 1.1m – between 2015 and 2020.

The new research also suggests the introduction of the mandatory national living wage this month will add to the financial burden of the care sector.

The financial restructuring of the Four Seasons group, Britain’s biggest care home operator, has also made it difficult to find finance for the sector.

Moore Stephens partner Mike Finch explains: ‘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.

‘With funding from 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.’

Mr Finch welcomes the social care precept, which has been taken up by 95% of eligible authorities, but warns it will not be enough.

‘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.’

He also argues the cost of regulations and property rents are placing a strain on the sector.