For Mark Gross, the investment case for social care begins with a basic mismatch. Britain is ageing, care needs are becoming more complex, and the infrastructure designed to support that demand remains badly underpowered. In that sense, the opportunity is obvious. The harder question is whether the sector is set up to attract the kind of long-term capital needed to meet it.
Gross, who leads private equity at Downing, sees social care as one of the clearest examples of a market where social need and economic demand now overlap. But he is equally clear that the sector’s long-term potential depends on more than demographics alone.
An underinvested market
Gross’ starting point is that the UK is not approaching the future of care from a position of strength. The sector, he argues, is still “underinvested”, even as expectations of quality continue to rise and the profile of need becomes more demanding.
“I think our healthcare infrastructure, our social care infrastructure is particularly poor,” he says. “It is underinvested and undersupplied… we are not starting from a great point.”
That matters because the issue is no longer just whether enough care exists in the abstract. It is whether the system can provide the right care in the right settings, at the right standard. Gross argues that people’s expectations of quality are changing at the same time as underlying need is becoming more complex, creating what he sees as both “opportunity and challenge” for investors and operators alike.
Yet he is careful not to rely too heavily on the national demographic story alone. Social care may be shaped by macro trends, but it still operates, in his words, as “a local business”, with local market dynamics often doing as much to determine viability as broad national demand.
The post-Covid shift
If the long-term backdrop is demographic, Gross believes there has also been a shorter-term change in the market brought on by the Covid pandemic. In his telling, the pandemic accelerated a more durable shift in who and when someone enters care and with what level of need.
In many care settings we have seen residents often arriving “much later in life”, with higher levels of need. Gross sees this as shift in the market over recent years, particularly in elderly residential care. It has forced some operators to adapt to be able to cater for higher acuity needs to ensure their businesses remain sustainable. One benefit of this approach is that catering for residents with higher acuity needs opens the door for operators to accept local authority or NHS funded residents at average weekly fees that start to make more sense. As an investor, Gross prefers to work with operators who are capable and comfortable operating higher acuity models as he believes this demand is likely to remain more robust through different market conditions.
“What we saw is the age profile of people coming into care homes coming much later in life [with] more pronounced needs and average length of stay shortening,” he says. “I think we’ve still got a bit of a hangover from that.”
The key point, however, is that he does not see this as evidence of a weakening market. Occupancy has recovered, and that in itself points to continuing strong underlying demand. The market, he argues, is not disappearing but changing shape.
“The market’s back up to 90+% per cent occupancy for best-in-class purpose-built homes,” he says. “So what it’s telling you is there is a level of demand within the market. If you know what you’re doing the sector can offer benefits to all stakeholders and decent risk-adjusted returns for investors.”
If there is too much uncertainty, they’ll direct the capital somewhere else.
For Gross, that demand is now more explicitly needs-driven. People are delaying decisions, in some cases until a crisis point. The result is a subtle but important market shift that may remain as an enduring feature of the post covid period.
Strategy and uncertainty
Gross is clear that funding remains a major pressure point, especially in publicly supported parts of the system. He worries that a section of the population is still not having its needs properly met, and he is cautious about reforms that look tidy on paper but fail to reflect the real cost of care in practice.
“I worry that there is a proportion of our population whose needs aren’t being appropriately met,” he says.
That concern feeds into his scepticism about simplistic national solutions. The danger, he argues, is that funding frameworks become too detached from the reality of delivery, especially in specialist care where costs vary sharply and the consequences of underpricing can be severe. The test is not whether a national model sounds coherent, but whether it reflects “the true cost of care”.
“How do you ensure that you don’t set national brackets at levels that are below the true cost of care?” he asks. “Because we’ve seen what it’s done to elderly [care].”
Yet the point Gross returns to most consistently is implementation. He is broadly sympathetic to the direction of travel in current policymaking, particularly around integration and neighbourhood care. What worries him is the gap between intent and delivery. Government decisions, he suggests, has been clearer at identifying the destination than explaining the route.
“What they’re trying to do is the right thing,” he says. “I think the government’s got some really interesting ideas… but the gap between strategic approach versus operational delivery has the potential to increase risk and constrain the amount of capital coming into the sector, particularly investors who are looking at health and social care for the first time.”
That matters because investors can live with risk, but they struggle with uncertainty. Gross says: “If there is too much uncertainty, they’ll direct the capital somewhere else.”
Unlocking supply
If Gross had to identify one policy change that would do most to unlock investment into social care, his answer is immediate: “sort out the planning system”. In his view, too much capital is tied up for too long in a process that is expensive, slow and highly uncertain. That squeezes smaller developers and makes it harder for the sector to build the new stock it plainly needs.
“You should assume that a new site will take two years and half a million pounds in planning costs,” he says. “You might be able to get it faster, you may be able to get it a bit less, but going into a development you have to assume it’s going to take you that long.”
That is why Gross is wary of allowing more eye-catching investment stories to dominate the debate.
“The real problem is we don’t have enough stock in the UK,” he says. “We are not building, we’re not developing enough new stock to meet the kind of demographic time bomb that we’ve already started to encounter.”
What emerges most strongly from the conversation is Gross’s belief that social care needs a broader, healthier investment ecosystem, with greater willingness to treat care as a core part of the country’s social infrastructure rather than an alternative investment class.
“We all have a vested interest in making sure there is a healthy ecosystem,” he says.
