Private care home residents are sustaining the publicly-funded sector which is struggling under a ‘cloud of uncertainty and risk', research by LaingBuisson published today has found.

The report's author, William Laing, said the ‘uncertainty' was the result of capacity slowly dropping out of the market, at a current rate of loss of about 2,000 beds a year, concentrated in non-affluent areas of the country.

He said: ‘A generalised bed shortage has been averted in the state-pay side of the market to date because local authorities have succeeded in containing placement numbers.

‘If they cannot continue to do this in the future, the natural conclusion is a capacity crisis driven by inadequate investment incentives at a time when underlying demographic demand is rising.

‘A severe and widespread capacity crisis would be painful - not least for people seeking care - but it could be the only way of re-establishing investment incentives, by driving state-paid prices up to sustainable levels.'

Responding to the report, a Local Government Association (LGA) spokesman said: ‘We want each of the party's manifestos to commit to closing the £2.3bn funding gap facing social care services by 2020, and to carrying out a formal review, of which local government leaders play a fundamental part, to help secure a long-term sustainable solution to protect vital support services that care for elderly and disabled people.'