Inflation refers to a broad rise in prices rather than price changes for particular goods or services, and Care markets are not immune. Overall price levels affect demand for care home places and influence families’ decisions. Prices of inputs and services consumed by homes also change, influencing the fees charged, the level of care provided, and even families’ ability to afford care.
This paper examines the effect of these two dimensions of inflation on care home prices in the UK in 2026. The underlying economic environment signals high input price increases for many homes throughout 2023 and 2024, which will be reluctant to pass on large price rises to families who are price-sensitive or financially supported by the government. The overall economic environment is uncertain, and price changes will vary at the regional level.
What inflation means for care homes
Driving force behind overall price increases, inflation affects costs and prices for all services, including care home services. Four main factors shape care home service pricing in 2026.
Inflation influences prices of all goods and services. If the cost of care home services is also rising, a common question is why. It’s not just because of poor service or declining quality, or avarice among owners and operators. Care homes are labour-intensive services; over 60% of their costs are staff-related. That means most service prices should rise at least in line with wage costs, unless increased efficiency allows for lower staffing levels without any loss of quality. However, care home prices don’t just follow wages. Other costs have an impact on care home pricing, as they do for all services.
The main underlying factors for 2026 are the continuing need for wage increases to attract and retain staff, energy costs and their impact on food prices, maintenance-related costs (for infrastructure, equipment replacement, and regulatory compliance), and the effect of turnover on training costs and, therefore, staffing levels. Affordability is a growing concern, and demand is more price-sensitive than a few years ago. Caps on private fees paid by council-supported residents will limit homeowners’ ability to raise fees to cover cost increases, and these caps are consequently becoming more visible in many areas. Maintaining open and straightforward communication with residents about pricing decisions remains important, especially in uncertain times.
Costs that rise with inflation
The financial pressures leading to fees rising in 2026 are diverse. High inflation drives up the costs of labour, energy, supplies and materials. Care homes require skilled staff to provide care to residents, but recruitment and retention remain a challenge for care homes; wages for care home staff are rising rapidly, and care homes have relied on agencies to fill vacancies, even at substantial cost. Sustained high demand for training reduces its availability. Staff turnover also has costs, such as the associated recruitment and induction of new staff, which add to the financial burden on care homes.
UK energy prices, which surged in 2022, have recently fallen back but remain high on historical grounds. Looking ahead, a sustained period of relative price stability at this higher level is expected, albeit with considerable uncertainty. Overall, electricity and gas prices are driven by international market conditions, while regional water prices are regulated. Price movements in key utility services may differ across the year; for example, the impact of Victoria’s winter water-use bans on risk in the electricity market and on consequent supply prices. UK food prices rose at a faster pace but are expected to settle within a broad inflation range, albeit with some developments at a more localised level. Care homes’ supply chains, some based on contracts with food suppliers, have also experienced pressure; packaging and transport costs, together with wider factors, have contributed to increases in delivered prices. Factors such as replacement cycles and other capital requirements – including building maintenance and repair, equipment renewal and health and safety compliance – remain important for care home operators of all types. In particular, the planned replacement and renewal of such capital plays a key role in long-term business sustainability.
Staffing and wages
In 2026, rising costs are putting pressure on care home prices. Increased care home fees, however, do not necessarily reflect a rise in the level of service provided but instead reflect increased costs of delivering care. The reasons for these cost pressures are varied, with costs in four key areas in particular closely linked to inflation.
Staffing and wages account for the largest share of a care home’s cost base; therefore, wage pressures in the sector are felt by each operator. Many homes have sought to alleviate staff shortages by using agency staff; while this is an attractive option in the short term, the cost may reduce the long-term sustainability of care homes. Providers report that use of agency staff remains high as care organisations in the region continue to compete for staff. Alternative approaches to addressing turnover, such as other recruitment collaborations, investment in training academies, or offering staff travel assistance to mitigate fuel costs, may enhance the long-term sustainability of a care home.
Energy and utilities
In 2022, the surge in gas prices led to higher electricity and gas prices; continued price pressures were felt ahead of winter due to the war in Ukraine. Gas prices fell during summer 2022. However, flash estimates for winter 2022 and 2023 showed that gas was very volatile. In 2023 and 2024, the cost of gas was forecast to be higher than during the early part of the 2020s. Service and Holiday activities are expected to have a relatively high seasonality. In particular, prices in the summertime are projected to be over 10% above the year’s average. In addition to these seasonal effects, prices for Hotels, Cafes, and Restaurants depend on changes in demand during public holidays. The base effects show that HCVF prices experienced the highest rate of inflation in the lead-up to the new decade, before easing as the economy began to recover from the COVID-19 pandemic.
The annual prices for Water supply and sewerage services are updated by the corresponding Ofwat indices. The price changes take effect from 1 April each year. In addition to these annual updates, the Prices of electricity and Gas supply services are projected using recent Ofgem forecasts. Prices for Electricity supply services are expected to rise rapidly in 2022 before returning to more modest levels of inflation thereafter. Price changes for Gas supply services follow a similar pattern, albeit with a much sharper rise in the current year. Prices for water supply and sewerage services are expected to increase steadily.
Food and supplies
Food prices increased strongly in 2022, and the outlook for 2023 is also for substantial change. Inflationary pressures are softening somewhat, and prices are expected to fall back towards pre-2020 levels, though they remain above the long-term trend. The situation for fruit and. vegetables is more uncertain with the potential for poor weather events leading to surges or dips in availability. Care homes are less affected by general consumer prices, as they are usually contracted for a fixed period. Price rises from supplier partners are expected to continue through 2024 and possibly longer. Long-term trends dominate the packaging and transport markets where packaging material and labour shortages remain a factor. Strong demand for new vehicles keeps replacement costs high.
Most homes will pass on food price increases to residents or Local Authorities either directly or indirectly. Long-term supported living contracts have provisions for price adjustment linked to CPI or similar indices. There are generally dilapidation clauses built into letting arrangements that enable advances in building standards to be passed on to landlords that must be fulfilled before the end of the contract. Longer-stay accommodation lessens the importance of day-to-day food quality and variety. Taste for the high-quality dining experience diminishes and may even reverse.
Maintenance and repairs
Driving inflation means the cost of looking after buildings and the equipment within them will rise. The properties require ongoing maintenance to ensure the fabric remains sound and that solar panels, heating systems, and other equipment work efficiently; this expenditure is continuing. Some capital replacements will also need to be planned for—heat pumps now, kitchen replacements in a few years?—and other planned capital expenditure (such as for improvements and expansion) will also be required in the near future, with a renewed focus on compliance (CQC, 2022; Welsh Government, 2022).
It is central, then, that care home businesses approach maintenance and repair scheduling with a clear strategy. What needs to be done, when, who is going to do it, and how quickly can they be scheduled? Planning maintenance and repairs is one thing; taking a strategic approach to it is something else entirely. As most care homes would attest, there is always a temptation to put it off. Charts that show repair and maintenance costs as they should be—and as they really are—are often revealing. The two last move in opposite directions as the building’s capital value rises, particularly when a good proportion of that capital value is associated with land and goodwill. The price of trade labour is the other delay factor and, like so much, the pandemic has accentuated it. Companies are now often using basically the same sources, so getting tradesmen can be difficult enough, let alone getting them at the right price. Building and other equipment insurance costs, following the general upward pressure, have also increased, and are now starting to approach the levels they reached in the aftermath of the credit crunch at the end of the last decade. A further area where rising costs may be impacting behaviour is in the time and costs associated with compliance visits.
How price changes affect residents and families
Increases in care home prices generally lead to higher resident fees. Some living in their own home or receiving domiciliary care may opt for a care home offering lower-cost residential care rather than higher-cost nursing care. This can change both the level of care required and the price paid. Affordability remains a critical issue for many. Although the government’s cap on personal assets (£20,000 for 2026), and its continued funding for care home services, remain in place, a recent survey of residential care in England found that 22% were self-funding care in their home. For them, higher fees generally mean higher impacts on disposable income. While homes vary in how visible the bill is relative to the overall financial position, residents, families, and funders alike understandably prefer transparency.
Supported by recent surveys, the price of domiciliary care is expected to rise; however, the anticipated price movement warrants careful monitoring. In the absence of rapid falls in supplier costs, agents involved in price negotiations, whether for local government, home care audit, or the Care Quality Commission (CQC), must ensure that equivalent care at home is available where desired and needed. The overall situation for funding support also requires keeping a close eye. Changes to the criteria for funding eligibility, or the amounts required from savings in banks or other easily liquidated assets, or changes to general funding levels could easily alter the funding landscape in a matter of weeks. No wonder that with self-funders now paying around three-quarters of all care home bills in England, care home pricing remains under tight scrutiny.
5. Government policy and funding in 2026
In 2026, various forms of government support remain important to cover COVID-19-related costs, support lower-income individuals, and limit care fee inflation. Enhanced welfare benefits are still supporting those receiving local authority care, while premiums paid by the Department of Health and Social Care to manage demand for winter NHS services are pushing local authority responsibility to maintain care fees, especially in the south-east and London, as the precursors for the winter NHS surge arrival. Subsidies for care homes in England for funding home care digitalisation, workforce training, and energy reduction were confirmed in a round of budget announcements for the financial year 2023/24, although eligibility levels and premium amounts are expected to reduce over time.
The potential for a more general election in 2024 increases the risk of changes to government policy. The possibility of caps on maximum care bills for those not funded by local authorities remains. Future changes to care home policy – requested in the interim report produced by the Care Cap Steering Group – will bring renewed scrutiny of care home funding levels and Care Quality Commission ratings. The political parties in northern Ireland are deliberating on a politically sensitive proposal to provide a one-off £400 million additional capital grant from the UK government to help financially distressed care homes with their capital bills; further funding in earlier years and longer-term adaptations of estate ownership structures have also been proposed. These considerations will serve to focus a spotlight on the pricing decisions of all care homes.
Practical steps for care homes
Care homes, part of larger specialist care groups, can lose sight of their individual businesses and become less competitive. Benchmarking against similar homes and keeping an eye on local market forces helps identify the optimal price point. As local pressures grow, operators that do not respond to these at year-end risk being overpriced. Specialism often carries a price premium, especially for London and parts of the southeast, but should not be taken for granted.
With inflation driving up prices, care homes should review all contracts approaching renewal, especially energy contracts. While wholesale gas prices fell sharply in late 2022 and early 2023, the resulting decline in retail prices has been muted. In the property sector, energy efficiency has never been more highly prioritised. Strategies that do not yield paybacks within five years, especially when capital is allocated to other new priorities, are likely to lose favour. Care homes will not be immune to the responsible use of energy-consuming resources, and combination microwave ovens seem set to become the norm.
Staff scheduling remains the key to ensuring appropriate resident-staff ratios at minimum cost. Turnover remains an issue for many homes, creating disruption and additional recruitment and training costs. However, pricing remains consistent across sectors whenever hospitality suppliers hold cards that enable charging what the market will bear and securing further price increases through packaging and distribution levies. Care homes should remember this and ensure negotiations with suppliers are proactive and not reactive.
Market outlook for 2026
The 2026 inflation path for care home prices is challenging to predict. The costs of labour, energy, food, and materials have all risen sharply in 2022 and 2023. Many of these increases persist. However, some sectors whose prices rose rapidly during the pandemic have seen or are beginning to see corrections.
The difficulty lies in the degree of closeness between capital funding requirements and fees charged by care homes. Services that are able to raise operating expenses to cover the ongoing pressures are well placed. The biggest potential pressure points appear to be on areas where home closures or relocation to alternative forms of care are increasing due to affordability constraints. Serious pressure on the level and duration of care provision may persist well into 2026. The extent of financial assistance for care will shape pricing decisions, but overall demand pressure will limit providers’ ability to implement significant price changes.
Care cost changes vary regionally, with rural areas affected more than urban ones, especially in London. Within the capital, outlying regions are more challenged than the inner boroughs, which remain the most expensive in terms of care costs. Care home prices in London’s inner boroughs increased by about 3% in 2024 compared with 2022. Care price developments beyond 2024 should be monitored closely: any signs of rapid price movement can trigger a reactive policy response.
Conclusion
Overall, care home prices in the UK are expected to rise in 2026—likely by more than the previous year’s increase—driven by staffing pressures stemming from high employee turnover, energy and utility costs, and escalating food prices. These price increases will require careful management by care home owners and operators. As yet, few options for transferring these increases into care fees are visible. Family and resident affordability will remain in focus, given the impacts on intake and occupancy, as well as due to mechanisms that aim to cap care costs for the individual. Support, subsidy, and exemption schemes will continue to play a considerable role in determining family and resident care costs. Despite the direct relationship between rising costs and higher care fees, the care home market nevertheless remains relatively opaque, with little clear visibility of costs or the need for fee changes.
Nevertheless, the care home sector will still need to anticipate a not-unlikely rise in 2026 prices that could outstrip affordability, potentially creating intake and occupancy pressures again. Precautionary approaches to monitoring and modelling pricing, along the lines of those in place for other costs, are likely to serve the sector well. For 2026, therefore, care home operators are encouraged to benchmark their pricing against the reasonable costs of comparable homes and for areas of need, to review energy and utility contracts and pricing, to explore energy-efficiency measures where applicable, to consider changes to staff scheduling that align with lower occupancy periods, and to negotiate carefully with food and supply partners on the forthcoming pricing round. In addition, as always, any price increases for the coming year should be communicated openly to residents and their families.
