Mike Parsons: You’re in good hands

The idea for Barchester, he says, came several years after leaving Saatchi, when two of his mother’s great aunts needed to go into care and he started looking at different homes. Parsons was not impressed.

“My aunts, who were neither rich nor poor, wanted somewhere social and in a nice setting,” he explains. “My experience of advertising gave me an acute sensitivity for the consumer’s perspective.

“The care homes I visited were dreadful. It was awful, and  places like that still exist today. At the time, my immediate thought was that there ought to be a couple of really nice care homes in the south of England. 

By this time, Parsons was living in the US, where he found the inspiration for the Barchester model. Ironically, 20 years later, he’s now returning to the US to fuel future growth. But more on that later.

“I based my plans on what I’d seen in the States – care homes in an amazing setting, where the residents could live a social life,” he says.

Back in the UK, Parsons quickly found the right setting for his project: a derelict, listed 17th-century farm in the Cotswolds.

“It was a stunning location,” he recalls. “An abandoned farm sitting on top of the hills looking down on the River Severn.”

Gorgeous, but also potentially a nightmare. Listed buildings are notoriously difficult projects to bring to completion. This didn’t deter Parsons, though, who struck a deal with the planners: he agreed to all their restoration demands if he was allowed to build new outbuildings alongside the old farm.

“And so we put the day rooms and restaurants in the stunning old building, and surrounded it with new modern and luxurious bedroom buildings,” he explains. 

To fund the venture, Parsons had to dig deep, he says, ploughing £1m of his own money into the project, and raising another £2m through the Bank of Ireland and a private investor.

The risk paid off. In its opening year, Moreton Hill Farm Care Centre – as the home was named – was full, and even won the 1994 Care Home Design Award.

Today, Barchester has grown into a huge, UK-wide organisation, with 15,000 staff looking after 11,000 residents in 220 care homes throughout the UK – “literally from John O’Groats to Land’s End”. 

He likens the business to Waitrose – “an upmarket, quite expensive brand, but with a good ethos that provides a very pleasant environment to consumers,” he says.

It’s also smart enough to position itself next to Waitrose stores across the UK. After all, the clientele of the two brands share much in common – well-to-do families, from the professional classes, who own property.

Barchester certainly does not come cheap: the average weekly rental is £788 – or more than £40,000 per year. This is roughly £200 more expensive per week than its nearest competitor, BUPA, which itself is already around £150 more expensive than the other two main care home providers, Southern Cross and Four Seasons.

Parsons makes no apologies: “Quality doesn’t come cheap. We spend a lot more on food than anybody else, and we employ more staff in our homes than the others.”

Spiralling costs

The cost of elderly social care is a national issue. In a recent report, NESTA (the National Endowment for Science, Technology and the Arts) estimated that the 21st-century healthcare market would be worth £47bn in 2013, led by the ageing population and demand for services for older people.

“It’ll be a real challenge. I don’t think the government has too many ideas on how it will adapt to the ageing population,” says Parsons.

This is the heart of the debate – how will the older population afford long-term care, and how can the government help?

It’s hard to calculate how much should be spent on social care, but the King’s Fund, a body set up to understand how the health system can be improved, estimates that in order to just keep pace with increasing numbers of older people, government funding would have to increase from the 2002 level of £10.1bn to £24bn by 2026.

“Residential care is one of the obvious beneficiaries of such spending, which positions high quality care providers such as Barchester in a sector of the market with strong growth potential,” says Tom Raymond of Armstrong Transaction Services, which advises private equity firms on investment opportunities.

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